Commonwealth of Australia Explanatory Memoranda Commonwealth of Australia Explanatory Memoranda[Index] [Search] [Download] [Bill] [Help]
1999
THE PARLIAMENT OF THE COMMONWEALTH OF
AUSTRALIA
HOUSE OF
REPRESENTATIVES
HEALTH
LEGISLATION AMENDMENT BILL (NO. 3) 1999
(Circulated
by authority of the Minister for Health and Aged Care,
The Hon. Dr Michael
Wooldridge, MP)
ISBN: 0642 39069X
OUTLINE
This Bill makes a number of amendments to the National Health Act
1953, the Private Health Insurance Incentives Act 1998 and the
Health Insurance Commission Act 1973.
The reforms contained in
Schedules 1 and 2 of this Bill amend the National Health Act 1953
and will improve the prudential regulation applied to the private health
insurance industry, allowing it to be more flexible and responsive to market
changes. These amendments will also strengthen the financial accountability of
those who manage health insurance businesses. In addition, the day to day
regulation of the industry will be simplified through the transfer of key
registration, de-registration and merger functions to the Private Health
Insurance Administration Council. Lastly, the Bill introduces a new regime for
dealing with registered organizations in difficulty which is focussed on
producing outcome that are in the best interests of
contributors.
Schedule 3 of the Bill amends the Private Health
Insurance Incentives Act 1998, the National Health Act 1953
and the Health Insurance Commission Act 1973. In particular, the
amendments to the Private Health Insurance Incentives Act 1998 will
enable the private health insurance incentives scheme created under that Act to
operate more smoothly. The changes relate to the day to day implementation or
operation of the scheme and will assist the Health Insurance Commission to
better fulfil its role under the Act. The amendments set out in Schedule 3 are
designed to operate retrospectively so as to ensure the smooth operation of the
incentive scheme from 1 January 1999.
The main items contained in this Schedule of the Bill
will:
− transfer responsibility for registration, cancellation of
registration and merger approval from the Minister to the
Council;
− restrict new registrations to companies whose primary
purpose is the operation of a health benefits fund;
− require any
current registered organizations that are unincorporated associations to become
incorporated as a company within a time period established by the
Minister;
− require registered organizations, in taking any action
relating to the application, investment or management of the assets of the
health benefits fund conducted by it, to give priority to the interest of the
contributors to the fund;
− require payments from the health benefits
funds to only be used for health insurance business purposes;
− allow
the Court to set aside certain transactions that are manifestly not in the
interests of contributors;
− create a new civil penalty regime that
make directors liable for serious contraventions of the Act by registered
organizations unless those directors have taken reasonable steps to ensure that
the organization would not make such a contravention; and
− create a
part-time Deputy Commissioner position (to be held by a member of
Council).
The main items contained in this Schedule of the Bill
will:
− repeal the current minimum reserve requirements and replace
them with scheme providing for solvency standards and capital adequacy
standards;
− allow both the Minister and the Council to appoint
inspectors to examine the affairs of registered organizations where illegal or
inappropriate conduct is suspected;
− repeal the Court ordered judicial
management, compulsory transfer and winding up of funds provisions and replace
them with a new administration and winding up scheme;
− allow the
Council to appoint an administrator to either a fund or an organization in
difficulty, have the administrator operate in the interests of contributors, and
require the administrator to make a recommendation to Council as to the most
appropriate options for the fund or registered organization;
− require
Court approval before a fund or registered organization in difficulty can be
forced to comply with a scheme of arrangement or be wound up;
− give
health benefit fund contributors priority over other unsecured creditors in the
distribution of fund assets upon winding up;
− make directors liable
for any loss to the fund if the loss was related to a contravention of the Act
and the fund or organization was subsequently wound up, unless those directors
can show that they used due diligence in an attempt to prevent such
contraventions;
− allow all funds and all incorporated registered
organizations to enter into a solvent voluntary wind up.
The main items contained in this Schedule of the Bill
will:
− allows the HIC 14 days to either grant or refuse a claim for
the incentive payment and provide for internal review by the HIC of a decision
refusing to pay a claim;
− enables a person who has paid a premium or
whose employer, as a fringe benefit, has paid their premium, to register for the
premiums reduction scheme;
− removes the requirement for annual
registration in the premiums reduction scheme for individuals and health
funds;
− introduces a new section that provides that the Minister may
revoke the status of a participating fund;
− requires a health fund,
when given notice, to produce a certificate in writing by a registered company
auditor as to the correctness of its accounts and records in relation to the 30%
Rebate;
− specifies additional categories that are debts due to the
Commonwealth and who the money is recoverable from and allows the HIC to set off
debts against amounts that are payable;
− requires a health fund to
provide the HIC, when given notice, information in relation to people who have
had a policy issued by the fund or have paid premiums in relation to a
policy;
− introduces a new section that enables the Minister to make
principles relating to personal information which a health fund must comply
with; and
− makes consequential amendments to the Health Insurance
Commission Act 1973 and National Health Act 1953.
FINANCIAL IMPACT STATEMENT
The Health Legislation Amendment Bill (No 3) 1999 will have no
significant impact upon the finances of the Commonwealth.
REGULATION IMPACT STATEMENT
Health Legislation Amendment Bill (No. 3) 1999
This Regulation Impact Statement relates to Schedules 1 and 2 of the
above legislation.
The Office of Regulation Review has advised that no
Regulation Impact Statement is required in relation to Schedule 3.
In 1989 the Private Health Insurance Administration Council (PHIAC) was
established under the National Health Act 1953 (the Act) to assist the
Government in the prudential regulation of the private health insurance
industry.
PHIAC’s powers are limited in that it is essentially an
administrative and advisory body and may generally only make recommendations to
the Minister for Health and Aged Care.
In February 1997 the Industry
Commission delivered its report on Private Health Insurance to the Treasurer
(Industry Commission Report No.57). In this report the Industry Commission
raised a number of issues regarding the prudential regulation of private health
insurance funds in Australia including concerns that there should
be:
− an independent regulator;
− improved capacity of the
regulator to respond in an effective way to health funds in financial
difficulty; and
− a stronger commercial focus to bring prudential
regulation of the health insurance industry in line with other prudential
bodies.
The report also expressed concerns in relation to the current
reserve requirements of $1 million or two months contributions (whichever is
greater).
This legislation addresses these and a number of the other concerns
raised by the Industry Commission Report No. 57. The changes are the result of
the Department’s subsequent investigation into the Industry Commission
Report and address Government, consumer and health industry concerns regarding
current inefficient regulation and the poor process in regulation.
In response to the Industry Commission report and as part of the
Government’s microeconomic reform objectives to move towards minimum
effective regulation, the Department undertook an investigation into the
regulatory powers and functions of PHIAC and compared these arrangements with
other prudential regulatory schemes.
After exhaustive investigation,
three options were considered:
1. Maintain current arrangements.
2. Transfer all prudential regulatory responsibilities to PHIAC so as to
ensure that PHIAC’s responsibilities are consistent with other Australian
prudential regulation regimes and to:
- enable PHIAC to set new,
flexible solvency and capital adequacy standards that put private health funds
on a more commercial footing;
- streamline processes so that when a
health fund is close to insolvency PHIAC can expediently appoint an
Administrator who will work in the interests of the contributors; and
- introduce new winding up provisions that give greater protection for
contributors in the distribution of assets.
3. Transfer all prudential
regulatory responsibilities to the Australian Prudential Regulation Authority
and ensure that those responsibilities are consistent with other Australian
prudential regulation regimes.
In considering the impact of these changes three major groups were
considered, the private health insurance industry, consumers (i.e. contributors
to private health funds), and Government.
The current prudential regulation arrangements are ineffectual in
relation to small and large health funds. Current arrangements are too
inflexible and decision-making in regard to prudential regulation slow. In
cases where there is a threat of insolvency the current arrangements are
cumbersome and inefficient. To maintain and reinforce their confidence in
private health funds other industry stakeholders e.g. contributors, are
demanding a more responsive and relevant prudential regulation regime.
This option does not provide effective or efficient arrangements for
adequate contributor protection as present minimum reserve requirements are not
suitable for the wide range of organisations that run health funds.
This option is not supported by the Government because it would
perpetuate the currently inefficient prudential regulatory regime.
Over time health funds have developed a sound relationship with PHIAC.
They believe that PHIAC is best placed to respond to the prudential regulatory
needs of both consumers (contributors), government and the industry. Further,
with an ability to determine meaningful prudential standards, monitor adherence
to those standards, and respond quickly and effectively to enforce those
standards PHIAC is considered the most appropriate body to take on full
regulatory functions.
This option will result in more efficient
regulation of health funds no matter what their organisation type or size. By
deleting minimum reserve thresholds and liquidity and diversification of reserve
levels from the Act and allowing PHIAC to set new, more appropriate solvency and
capital adequacy standards private health funds will be able to operate on a
more commercial footing and be more market responsive. The impact of these
changes will be particularly beneficial to small health funds that have
customarily been required to seek exemption from the minimum reserve
requirements.
Under the proposed administration arrangements PHIAC will
be able to appoint an Administrator quickly when there is a risk of insolvency.
The process will be more responsive and will better safeguard the interests of
both the health funds and the contributors. Health funds will be able to
voluntarily merge or wind up and, where there is a risk of insolvency and an
Administrator has been appointed, enter into a voluntary deed of arrangement.
In addition, PHIAC will have to obtain Court approval prior to merging or
winding up a fund if the fund opposes such action.
There will be minimal
change in the cost of compliance and little or no additional administrative
burden for health funds.
This option will increase the likelihood that private health funds remain
financially sound, more accountable, and able to meet their obligations to
contributors. It will provide grounds for increased contributor confidence as
funds will be regulated both under the National Health Act 1953 and
Corporations Law.
In addition, the existing Judicial Management provisions of the Act will be
replaced with a new administration regime that seeks to promote the most optimal
outcome for contributors.
This option provides for a move towards minimum effective regulation of
the private health insurance industry and will facilitate more efficient
essential regulation.
There are currently sufficient differences between the health insurance
market and general insurance market (eg the non-risk rated nature of health
insurance) to make it impractical for a general insurance regulator to take
control of the prudential regulation of the private health insurance industry at
this time.
While this option offers the same benefits as option 2 in terms of
increased contributor confidence it does not provide for a regulator with
specific experience in acting with a comprehensive knowledge of the health
industry and to work in the interest of health insurance consumers.
It is the Government’s view that more time is required to allow the
private health insurance industry to move to a more commercially oriented
regulatory framework.
The views of all relevant stakeholders were thoroughly canvassed through
the inquiry conducted by the Industry Commission. Further, the Government has
closely monitored the response of the industry, consumers (i.e. contributors)
and investors to the Industry Commission inquiry.
The Government will
continue to discuss and account for the views of all relevant parties in its
implementation of the proposed arrangements.
In view of the Industry Commission’s recommendations and taking
into consideration the impact on all stakeholders Option 1 is not considered a
viable option.
Although Option 3 has merit, given the significant
differences between the general insurance and private health insurance
industries (i.e. the non-risk rated nature of health insurance), it is not
considered immediately viable.
Option 2 is the preferred option as it is
both viable and the most beneficial for all stakeholders at this time. It
ensures essential regulation is flexible and tailored to market and client needs
and that the regulator has effective market control. In addition, when there is
a threat that a health fund may become insolvent, this option facilitates
expedient action and an outcome that is in the best interest of contributors.
The preferred option will be implemented through amendments to the
National Health Act 1953. In addition, in the lead up to PHIAC taking on
the prudential regulatory role, any necessary additional support will be
provided to PHIAC to ensure that it is prepared for its extended role. Health
funds will be informed of new arrangements through consultation and Commonwealth
Department of Health and Aged Care circulars.
The Department of Health and Aged Care will review arrangements five
years after the regulatory changes take effect to assess the status of health
fund regulatory dependence.
|
Council
|
Private Health Insurance Administration Council
|
|
|
|
|
fund
|
health benefits fund
|
|
|
|
|
HIC
|
Health Insurance Commission
|
|
|
|
|
Minister
|
Minister for Health and Aged Care
|
|
|
|
NHA |
National Health Act 1953 |
|
|
|
|
organization
|
registered health benefits organization
|
|
|
|
PHIIA |
Private Health Insurance Incentives Act 1998 |
|
|
|
|
registered organization
|
registered health benefits organization
|
This section cites the short title of the proposed legislation as the
Health Legislation Amendment Act (No. 3) 1999.
This section provides that, except for the particular commencement dates
in this section, the amendments to the National Health Act 1953 (the NHA)
commence on the day on which the legislation receives Royal Assent. Items with
commencement dates specified as being other than the day of Royal Assent are as
follows:
− Schedule 1 and Part 1 of Schedule 2 commence on a day to
be fixed by Proclamation or otherwise on a day six months from the day of Royal
Assent.
− Part 2 of Schedule 2 (which removes references to
friendly societies from the NHA as amended) will commence on the
latter of either:
. a day that is the transfer day for the purposes of
the Financial Sector Reform (Amendments and Transitional Provisions) Act (No.
1) 1999; or
. immediately after the commencement of Part 1 of Schedule
2.
The sole purpose of Part 2 of Schedule 2 is to remove from Part 1 of
Schedule 2 any references to friendly societies after the Proclamation of the
transfer date in the Financial Sector Reform (Amendments and
Transitional Provisions) Bill (No. 1) 1999.
The primary purpose of
the Financial Sector Reform (Amendments and Transitional Provisions) Bill
(No. 1) 1999 is to transfer regulatory responsibility for State and
Territory based financial institutions, including friendly societies, to a
Commonwealth regulatory regime. Upon transfer, friendly societies previously
registered or incorporated under State or Territory law will become companies
under the Corporations Law and will be dealt with as such by the
National Health Act 1953 (as amended).
A further consequence of
the Financial Sector Reform (Amendments and Transitional Provisions) Bill
(No. 1) 1999 will be the amendment of a large number of Commonwealth Acts
(including the National Health Act 1953) to remove any reference to
friendly societies (as entities registered or incorporated under State and
Territory law). However, as the Financial Sector Reform (Amendments and
Transitional Provisions) Bill (No. 1) 1999 and this Bill are expected to be
in Parliament at the same time, it is desirable that a mechanism be put in place
in this Bill to prevent it from operating contrary to the intent of the
Financial Sector Reform Bill.
− Schedule 3 is taken to
have commenced on 1 January 1999.
The amendments in Schedule 3 are
amendments to the Private Health Insurance Incentives Act 1998, the
Health Insurance Commission Act 1973 and the National Health Act
1953. These amendments are retrospective and will be taken to have
commenced on the same day as the Private Health Insurance Incentives Act
1998, ensuring that the Act, as amended, is fully operative as of 1 January
1999. In addition, retrospective operation will offer greater overall
effectiveness and efficiencies for the relevant Commonwealth agencies involved
in the administration of the Rebate, for the private sector and for the
community. Advantages of the amendments having retrospectivity are as
follows:
− there will be internal review by the Health Insurance
Commission of its decision not to pay the incentive payment (item 4: clause
6-25);
− there will be no annual registration for participants in the
premiums reduction scheme or for health funds (items 10 and 29, 30 and 31;
subclause 11-5(1) and clause 14-5);
− a person who pays a premium but
is not covered by the policy will be able to participate in the premiums
reduction scheme (item 14: clause 11-10);
− there will be certainty in
the notification requirements of the Health Insurance Commission (items 17 and
25: subclauses 11-25(1) and 11-40(3));
− the Health Insurance
Commission will have the ability to set off debts due to the Commonwealth (item
56: clause 18-20); and
− visitors from countries with whom Australia
has entered into a Reciprocal Health Care Agreement will be eligible for the
Rebate from 1 January 1999 (item 65: section 20-5).
The length of
time for the period of retrospectivity will be relatively short.
This section notes that each Act that is specified in the Schedules is to
be amended as set out in the applicable items in the Schedule
concerned.
Schedule 1 – Registration of registered organizations and related matters
National Health Act 1953
Schedule 1 of the Bill deals with the registration of registered
organizations and related matters such as the role of the Private Health
Insurance Administration Council in the registration process.
This item inserts a definition of health fund rules at subsection
4(1) of the National Health Act 1953 (the Act).
‘Rules’ are the principles devised by the health benefits
organization that relate to the day to day management of the organization. They
may include policies and decision-making procedures within the management
structure of the health benefits organization; any contractual relationships
between the organization and hospitals; and, any relationship between the
contributors to health benefits funds and the organization that operates the
health benefits fund. Rules usually state the rates of contribution and
conditions attached to the rates of contribution, contributor entitlements and
benefit levels. They may include things such as benefit limits, levels of
discounts, any excess or front-end deductible payable, extent of ancillary cover
etc.
This item repeals section 68 of the NHA and substitutes three new
subsections. The new subsection 68(1) allows organizations to apply to the
Private Health Insurance Administration Council (Council) for registration to
operate a registered health benefits organization subject to the conditions set
out in subsection 68(2). This registration function was a function previously
held by the Minister for Health and Aged Care
The conditions for future
registration of set out in subsection (2) are that the
organization:
− must be a company limited by shares, guarantee or both,
and
− its constitution and rules must ensure that:
. the
organization is established for the purpose of conducting a health benefits fund
and for no other purpose unless that purpose is incidental to the conduct of the
fund; and
. there is to be credited to the fund the whole of the income of
the organization arising out of the carrying on by the organization of business
as a registered health benefits organization.
Subsection (3) clarifies
that subsection 68(2) does not exclude from registration, for profit
organizations.
This item inserts a new subsection (1A) before subsection 69(1). The new
subsection requires that an application for registration must be lodged with the
Council which supports the changes made in item 3 above.
These items transfer the responsibility for the registration of health
benefits organizations from the Minister and the Department of Health and Aged
Care to the Council, ensuring that Council can undertake all the
responsibilities for registration previously held by the Department and the
Minister.
This item inserts a new section after section 72A(c) of the NHA.
The new section requires the Registration Committee and the Council, in
considering an application from an organization for registration to operate a
health benefits fund, to assess whether that organization will meet and be able
to maintain the new solvency standards established under Division 3A and 3B of
the NHA.
This item is another machinery provision which substitutes Council
for Minister in line with the amendments set out above.
This item is a transitional provision designed to ensure that the
Register of Health Benefit Organizations previously maintained under subsection
73(2AA) of the National Health Act 1953 is transferred to the
Council so that the Council can maintain it after the commencement of this
Schedule.
This item replaces the word rules with the words constitution
or the rules each time rules occurs in subsections 73(2A) and (2B) of
the NHA. This wording allows the Council to consider both the
constitution and rules of an applicant seeking registration as a registered
organization.
This item is a machinery provision giving effect to the transfer of
responsibility from the Secretary to the Council.
This item requires the Council to inform the Department of a decision to
register or refuse to register a registered organization as soon as practicable
and no more than 7 days after the decision has been made.
This item inserts five new sections after section 73.
Subsection 73AA(1) requires that registered health benefit organizations
not incorporated prior to the commencement of Schedule 1 must arrange to
transfer their health insurance business to a company that is eligible to apply
for registration under section 68 within a time period specified by the
Minister.
Where a registered organization does not comply with subsection
73AA(1), under subsection 73AA(2), the registration of that organization to
operate a health benefits fund will expire on the date at which the Minister
specified the transfer was to have been made.
When the health insurance
business is transferred the Council is to issue a written certificate under
subsection 73AA(3) that the organization has met the requirements of subsection
73AA(1). Upon issue of the certificate the new registered organization (ie the
company) will, for all purposes relating to the health insurance business, be
the successor in title to the original registered organization.
The time
period specified in a notice from the Minister to the registered organization
under paragraphs 73AA(1)(a) or (b) is reviewable by the Administrative Appeals
Tribunal.
73AAB – Registered organizations to maintain
eligibility status
Section 73AAB states that a health benefit
organization’s registration will cease to be effective if at any time, if
it ceases to be a company incorporated under Corporations Law, if it
otherwise becomes unincorporated or if it changes it constitution or rules so
that a health benefits fund cannot be conducted by it.
73AAC –
Certain Duties of a registered organization regarding assets of its health
benefits fund
Subsection 73AAC(1) requires that registered
organizations that operate a health benefits fund, give priority to the
interests of its health benefits fund contributors when making decisions about
the application, investment or management of its assets from health benefits
funds.
Subsection (2) exempts a registered organization from
contravention of subsection (1) where, having regard to the circumstances
existing at the time of the act or decision, it is reasonable to believe that
the act or decision give priority to the interests of the contributors to its
health benefits fund.
Subsection (3) clarifies that subsection (1) does
not prevent a registered organization doing anything that it is permitted or
required to do under the National Health Act 1953. Thus, for example, it
is still lawful for a “for profit” registered organization to pay a
dividend to its shareholders because such a payment is lawful under paragraph
73AAD(2)(d).
73AAD – Payments from health benefits fund
Section 73AAD ensures that assets of the fund are managed
appropriately by restricting payments that can be made from health benefits
funds to:
− liabilities incurred in covering contributors;
− payments to the Health Benefits Reinsurance Trust Fund;
− investments for the health insurance business;
− if the
organization has been established for profit–distributing profits to
shareholders;
− any other purpose that is directly related to the
health insurance business.
73AAE – Restrictions that are imposed
on certain financial transactions by registered organizations
Section
73AAE provides a mechanism to invalidate or vary a financial transaction that
directly and detrimentally affects the assets of the health benefits fund where
it is clear that the transaction was manifestly or unmistakably not in
the interests of contributors.
Subsections 73AAE(1) and (2) allow the
Council, an administrator or a liquidator to apply to the Court to set aside or
vary the terms of borrowings, contracts of guarantee or charges over fund assets
where the Court is satisfied that the transaction is manifestly not in the
interests of the contributors.
The Court, under subsection (3), may
consider a number of circumstances that would tend to imply that the transaction
was not manifestly in the interests of contributors. Thus, in the case of a
loan, the Court should consider if it was for the benefit of any other person
than the contributor and whether the amount of the loan was excessive. Further,
in the case of a contract of guarantee, the Court should consider whether the
contract was entered into solely for the benefit of the fund. Also, if the
transaction involves the giving of a charge over assets, the Court should
consider whether the charge secures other liabilities than those of the health
insurance business and whether it exceeds the sum borrowed for the purpose of
the health insurance business. Lastly, the Court can consider whether or not
the transaction had an impact on the organization’s ability to comply with
the solvency and capital adequacy standards or their own constitution and
rules.
Subsection (4) protects the other party from having the
transaction set aside if they entered into the transaction in good faith and
without the knowledge of conditions in subsection (3), and if setting aside or
varying the transaction would cause substantial hardship to the party.
Subsection (5) makes it clear that the Federal Court is the Court with
jurisdiction in relation to these matters.
This item inserts a new subsection 73A(1) that clarifies that the
Minister will no longer be imposing conditions of registration upon registered
organizations relating to refund agreements.
This item inserts a new section 73ABD.
73ABD – Further
conditions and revocation or variation of conditions – Council’s
powers
Section 73ABD sets out the Council’s powers with respect
to the imposition of further conditions of registration as well as
Council’s power to vary conditions made either under subsection 73(1) or
paragraph 73ABD(1)(a).
Subsection (1) permits the Council to impose a
further condition or revoke or vary an existing condition after consultation
with the Minister.
Subsection (2) requires the Council to give written
notice of any change in conditions that it decides and requires that the notice
be served upon the public officer of the organization.
Subsection (3)
requires the Council, within 1 month of making a decision about the imposition,
revocation or variance of a condition , to publish that decision in the
Gazette in a particular form.
Subsection (4) simply expands the
definition of condition to include a term.
This section repeals subsection 73B(1) and replaces it with a new
subsection that requires the Minister to consult with council prior to imposing
or revoking a further condition of registration made under paragraph
73B(1)(b).
This item is a savings and transitional provision. Subsection (1) will
ensure that any term or condition of registration imposed by the Minister prior
to the commencement of this legislation will have the same effect as a term or
condition imposed under this legislation. However, this item makes it clear
that subsections 73B(1A) and (2) do not apply to the imposition of a term or
condition originally imposed under section 73.
Subsection (2) permits the
continuation of the form of record used by the Secretary under the National
Health Act 1953 prior to the commencement of these provisions to have effect
as though it were a form of record approved by the Council.
This item simply adds the words “and to the Council” after
“Secretary” in the legislation to accurately reflect the roles of
the respective parties under these amendments.
This item makes subsection 74(5) subject to a new subsection
74(5AA).
This item inserts a new subsection (5AA) into section 74. Section 74
deals with the responsibilities of the public officer of a registered
organization. Subsection 74(5) creates a penalty for a public officer if the
organization contravenes or fails to comply with the NHA.
The new
subsection 74(5AA) prevents the public officer from being made liable for a
penalty under subsection 74(5) (due to a contravention of the NHA by the
organization) if the public officer has already been required to pay a pecuniary
penalty under new subsection 74A(1) in relation to the same contravention of the
NHA by the organization.
This item simply adds the words “and to the Council” after
“Secretary” in the legislation to accurately reflect the roles of
the respective parties under these amendments.
This item repeals section 74A and replaces it with a new
section.
74A – Officers liable for non-compliance of registered
organizations
The National Health Act 1953 has traditionally
made the public officer liable for any failings of a registered organization to
comply with this Act.
However, in the modern corporate world it is also
appropriate that those persons who take up appointments on the Boards of health
insurance businesses are also held accountable for the efforts they make to
ensure that the business complies with the relevant law, in this case, the
National Health Act 1953.
Thus, subsection 74A(1) makes directors
(as defined) and other officers of the organization liable to a (civil)
pecuniary penalty if the organization contravenes the NHA and it can be
demonstrated that the officer in question failed to take reasonable steps to
ensure that such a contravention would not occur.
Consequently,
subsection 74A(1) imports two fundamental notions of corporate responsibility.
Firstly, regardless of the size and structure of the health insurance business,
there are always reasonable steps officers can take to prevent contravention of
the NHA. It is for the Court to determine whether or not the steps an
officer has taken are below those reasonably required. Note, however, that
before a Court may determine that an officer is liable for a penalty it must be
satisfied that the organization contravened the NHA and that the officer
in question failed to take reasonable steps. The onus, therefore, is upon the
plaintiff to prove that the defendant failed to take reasonable
steps.
Secondly, the penalty for failing to take such steps is a civil
one; there is nothing to be gained in making such conduct criminal. Further, in
terms of a maximum penalty there is no distinction between the penalty that may
be imposed upon a public officer under subsection 74(5) (ie a fine of $10,000)
and the pecuniary penalty that may be imposed upon an officer.
Subsection
74A(2) confirms that, in demonstrating that the officer took reasonable steps,
all that may need to be shown is that the officer took reasonable steps in
respect of a class of such contraventions (thus saving the officer from having
to show that they have taken reasonable steps in relation to each and every
possible contravention of the NHA).
Subsection (3) confirms that
if the officer in question is also the public officer of the organization they
will not be made liable under subsection (1), in respect of a particular
contravention by the organization, if they have already been penalised under
subsection 74(5) for the same contravention by the organization. In other
words, there is no possibility that a public officer may be made liable for the
same contravention twice.
Subsection (4) states that the Minister may
authorise a person to institute proceedings in the Federal Court of Australia
under this section. Such authorisations may relate to a specified person or to
a class of persons and may also relate to all applications, a class of
applications or a single application. Thus, for example, the Minister may
choose to authorise the Australian Government Solicitor to institute all
applications that are made under this section in the Federal Court and on behalf
of the Commonwealth.
There will be a time limit of 6 years in relation to
such applications (subsection (5)).
Any application under this section is
a civil matter. Thus, the matter must be decided by the Court on the balance of
probabilities (subsection (6)).
Subsection (7) ensures that any orders of
the Court made under subsection (1) may be enforced as a judgement; that is, the
Court may use its judgement enforcement mechanisms to ensure compliance with its
orders.
Subsection (8) confirms that, just as is the case with the public
officer, the registered organization shall not reimburse or otherwise pay the
penalty on the officer’s behalf.
Subsection (9) declares that the
Federal Court of Australia has jurisdiction to hear applications made under this
section.
Subsection (10) defines the Court and officers for
the purposes of the section. Note that the definition of officers is not
exhaustive. Thus, if it were appropriate, it would be possible to take action
against, for example, a General Manager, company secretary, liquidator, or any
other person who had a senior role in the organization and who was clearly in a
position to take steps to prevent contravention of the NHA.
This item removes the word Minister where it occurs in subsections
79(3) and (4) (dealing with cancellation of registration of organizations) and
substitutes the word Council in keeping with their changed roles.
These items are designed to reflect the changed role of the Minister and
the Council. They substitute the word Council for Minister
wherever occurring in these two subsections with deal with when cancellation of
the registration of a registered organization can occur.
This item adds 3 new subsections into section 79.
Subsection 79(7)
stipulates conditions under which the Council can cancel the registration of an
organization previously registered to operate a health benefits fund. The
Council must be satisfied that:
− the organization has repeatedly
contravened or contravened a number of obligations of the NHA;
or
− there has been a contravention by the organization that has
serious implications for contributors.
Subsection (8) states that, for
the purpose of subsection (7), contraventions associated with the
non-discriminatory nature of health benefits funds or the financial management
of the organization would be considered as having serious implications for
contributors.
Subsection (9) requires the Council to notify the Secretary
about the cancellation of registration within 7 days of it having taken
place.
This item replaces the word Secretary with Council in
subsection 81(1), a provision that deals with notification of registration by
way of an annual list in the Gazette.
This item replaces the word Minister with Council in
subsection 81(2) thereby requiring the Council to publish details of the
registration, or cancellation of registration, of an organization in the
Gazette.
This item repeals the definition of deputy (that is, a person who
is a deputy of a member of the Council) in section 82A (which is the
interpretation section for the Part VIAA of the NHA, that is, the Part of
the NHA dealing with the Private Health Insurance Administration
Council).
This provision has been repealed because there is no further
need for deputies of Council members now that the Council consists of persons
who have all been appointed in their own right rather than having been appointed
as representatives of registered organizations or industry bodies.
This item creates a new subsection that provides that the Minister may
appoint one of the members of Council as a Deputy Commissioner of the Council.
A Deputy Commissioner is required so that the Council can ensure that there is a
person available to perform the powers of the Commissioner at any time. The
Deputy Commissioner may perform the powers and functions of the Commissioner at
any time when the Commissioner (or a person who is acting as Commissioner) is
unavailable.
This item provides that the Deputy Commissioner is appointed on a
part-time basis.
This item amends the paragraph 82F(1)(a), a provision which allows the
Minister to make guidelines in relation to the appointment of the Commissioner
and members, to allow such guidelines to be made with respect to the appointment
of a member as Deputy Commissioner.
This item inserts two new sections as a consequence of the creation of a
Deputy Commissioner.
82PCA – Deputy Commissioner to act as
Commissioner in certain circumstances
Subsection 82PCA(1) notes that
the Deputy Commissioner is to act as Commissioner:
− during a vacancy
in the officer of Commissioner (ie if no Commissioner has been appointed and no
acting Commissioner has been appointed); or
− during any period when
the Commissioner (or a person acting as Commissioner) is unable to perform their
duties.
Subsection (2) declares that a Deputy Commissioner may not act in
the role of Commissioner for a period greater than 12 months.
Subsection
(3) confirms that any technical failure in meeting the requirements in
subsection (1) will not cause any act or exercise of power by the Deputy
Commissioner to be made invalid or void.
82PCB – Powers and
duties of persons acting as Commissioner
Subsection 82PCB(1) declares
that, subject to any direction by the Commissioner, an acting Commissioner or
Deputy Commissioner (when they are performing the role of Commissioner) have all
the powers of the Commissioner.
Any act lawfully done by an acting
Commissioner or Deputy Commissioner (when they are performing the role of
Commissioner) is to be deemed to be a valid act of the Commissioner under the
NHA and any other Act (subsection (2)).
Action by an acting
Commissioner or Deputy Commissioner does not prevent the exercise of the power
or the performance of the function by the Commissioner (subsection
(3)).
Where the exercise of a power or performance of a function of the
Commissioner requires that person to form a particular opinion, to hold a
particular belief or to have a particular state of mind, both the acting
Commissioner and Deputy Commissioner (when they are performing the role of
Commissioner) are deemed to fulfil those requirements where they have formed
that requisite opinion, held the requisite belief or possess the requisite state
of mind (subsection (4)).
This item repeals section 82PD, which previously dealt with deputies of
members and is redundant as a result of the above amendments.
These items all remove references to deputy in keeping with the
above amendments that abolished the position of deputy member of
Council.
This item simply replaces the word Minister with the word
Council in section 82ZP which deals with the necessary approval for the
merger of funds.
This item replaces the existing subsection 82ZP(1A) to provide that, with
respect to the voluntary merger of a fund, the Council has a discretion to
approve the merger unless action is being taken in relation to all or any of the
organizations under Part VIA of the NHA.
These items remove the reference to Minister and substitute the
word Council in subsections 105AB(1A) and (2); these subsections deal
with Administrative Appeals Tribunal review of a decision to refuse to register
an organization under subsection 73(1) and the imposition of conditions of
registration under that subsection.
This item inserts two new subsections into section 105AB, which deals
with appeals to the Administrative Appeals Tribunal.
Subsection (2A)
allows an application to be made to the Tribunal for a review of a decision of
the Minister to specify a particular time, or a particular further time, for the
transfer of the health insurance business of an unincorporated association to be
transferred to a company capable of applying for registration under the amended
section 68 of the NHA.
Subsection (2B) allows an application to be
made to the Tribunal for review of a decision by Council under the new section
73ABD to impose a further condition of registration (or vary such a condition)
upon a registered organization.
This item removes the words “or a further term or condition”
from paragraph 105AB(3)(b) as these words are unnecessary for the new
application of this paragraph.
This item inserts savings and transitional provisions which ensure the
key matters associated with registration remain effective after the commencement
of this Act and apply as they did previously.
Subsections (2) and (3)
provide that where, before the commencement of Schedule 1, an application for
registration as a registered health benefits organization has been lodged with
the Secretary of the Department but not referred to the Registration Committee
or the application has been referred to the old Registration Committee but the
Committee has not made a report, then the Secretary of the Department must refer
the application to the newly constituted Registration Committee (see Item 5
above).
Subsection (4) provides that where a report, in relation to
registration, has been made to the Minister by the old Registration Committee,
and the Minister has not considered the report, he or she must refer it to the
Council.
Subsection (5) defines the old Registration Committee as
the Registration Committee operating under the National Health Act 1953
prior to the commencement of Schedule 1 and the reconstituted Registration
Committee as the Registration Committee that will operate when the Council
assumes responsibility for health fund registration.
Schedule 2 – The prudential regulation of registered organizations
National Health Act 1953
Introduction
Part 1 of Schedule 2 contains substantial
new measures providing for the prudential regulation of registered organizations
and deals with the appointment of administrators to funds and organizations and
the winding up of funds and registered organizations. The general purpose of
the new provisions is to provide greater protection for the assets of the health
benefits fund and the interests of the contributors to those funds.
This item inserts a new section 7 into the Act.
7 –
Application of provisions of Corporations Law – general
matters
The new section explains how an applied provision of the
Corporations Law is to be treated, in relation to general matters, for
the purposes of the NHA. Subsection 7(1) creates two new terms
(application provision and applied the Corporations Law provision)
for use in the section.
Subsection (2) provides that, where a provision
of the NHA applies a provision of the Corporations Law, any
regulations or instruments made for the purposes of that particular
Corporations Law provision will also apply in relation to that
Corporations Law provision as it is applied under the
NHA.
Subsection (3) states that where a provision of the
NHA allows regulations to modify a Corporations Law provision
applied under the Act, that power to modify the Corporations Law is also
a power to modify regulations or instruments made for the purposes of the
applied provision of the Corporations Law.
Subsection (4) confirms
that, if there is a power in the NHA that allows the regulations to
modify an applied provision of the Corporations Law, that power is not
hindered merely because there has also been a modification of the relevant
Corporations Law provision by the NHA; so long as any regulations
are consistent with the modification of the Law made by the
NHA.
Subsection (5) states that a Corporations Law
provision that is applied under the NHA, including any regulation or
instrument created for the purposes of such a Corporations Law provision,
is to be interpreted in accordance with the definitions and principles contained
in the Corporations Law unless a contrary intention is evident in the
NHA or relevant regulations.
Subsection (6) confirms that, where a
provision of the Corporations Law is applied by the NHA and that
provision allows something to be done in or by regulation, regulations may be
made under this Act for that purpose. If such regulations are made under the
NHA, those regulations override any regulations or instruments made for
the purposes of the Corporations Law that may otherwise apply because of
new subsection (2) (to the extent that they are inconsistent with each
other).
This item repeals sections 73BAB and 73BAC of the NHA. The
repealed sections specify the requirements for minimum financial reserves that
registered health benefits organizations must maintain and how an exemption from
those requirements can be made.
This item inserts two new Divisions in place of 73BAB and 73BAC. These
two new Divisions institute a new regime, consistent with those applicable to
other segments of the insurance industry, which seeks to provide a more flexible
and responsive regulatory scheme.
Division 3A – The solvency
standard for registered organizations
Division 3A details the
solvency standards for registered organizations and related
matters.
73BCA – Purpose of Division
Section 73BCA
specifies that the purpose of Division 3A is to establish solvency standards and
ensure that registered organizations that operate health benefits funds comply
with those standards in order to remain solvent.
73BCB – Council
to establish solvency standards
Subsection 73BCB(1) requires the
Council to establish written solvency standards.
Subsection (2) allows
the Council to set different standards for particular funds, for different types
of funds, or apply standards in certain circumstances.
Subsection (3)
requires the Council to consult with the Australian Government Actuary before
establishing a solvency standard.
Subsection (4) declares that a solvency
standard established by the Council for the purposes of this Division is a
disallowable instrument for the purposes of section 46A of the Acts
Interpretation Act 1901.
73BCC – Purpose of solvency
standard
Section 73BCC explains that the purpose of the solvency
standard is to ensure that registered organizations that operate health benefits
funds will at all times, as far as practicable, have sufficient assets to be
able to meet their liabilities as they become due.
73BCD –
Registered organizations to comply with solvency standards
Subsection
73BCD(1) stipulates that, subject to subsection (2), each registered
organizations that operates a health benefits fund must comply with the solvency
standards set by the Council.
Subsection (2) allows the Council to
declare, by notice in writing, that the solvency standard does not apply to a
particular registered organization, does not apply in particular circumstances
or does not apply for a particular period.
Subsection (3) states that, in
making a declaration under subsection (2), the Council may impose conditions
upon any registered organization affected by the declaration.
Subsection
(4) states that, if an organization fails to comply with any conditions referred
to in subsection (3), the declaration made under subsection (2) is taken to
cease to apply.
Subsection (5) states that, if the Council is satisfied
that a declaration made under subsection (2) or a condition imposed under
subsection (3), no longer applies to a registered organization the declaration
or the condition should be revoked or varied, as is appropriate.
Where a
registered organization requests that a declaration made under subsection (2),
or a condition referred to in subsection (3), be varied or revoked the Council
must determine, within 28 days, whether it wishes to revoke or vary the
declaration or the condition (subsection (6)). If the Council does not vary or
revoke the direction within 28 days, subsection (7) states that declaration or
condition remains valid.
Under subsection (8) the Council must give the
registered organization written notice of its decision to revoke or vary a
declaration or condition under subsection (6) and, where it refuses to vary or
revoke, the Council must provide the reasons for its decision.
Subsection
(9) ensures that a reference to a declaration or condition in this section
includes a declaration or condition as varied.
A decision by the Council
to refuse to revoke or vary a declaration, or refuse to revoke or vary a
condition applying in relation to a declaration, is reviewable by the
Administrative Appeals Tribunal.
73BCE – Council may give
solvency directions
Subsection 73BCE(1) allows the Council to give
written directions (solvency directions) to a registered organization
that operates a health benefits fund where it is satisfied there are reasonable
grounds to believe that a registered health benefits fund may be insolvent.
Subsection (2) defines solvency directions as those the Council
determines to be reasonably necessary to ensure that a registered organization
that operates a health benefits fund will have adequate assets to meet its
health benefits fund liabilities as they become due.
To allow the Council
to prevent a currently solvent fund from becoming insolvent subsection (3)
allows the Council to give solvency directions to a registered organization even
when it is satisfied that the health benefits fund meets the solvency standard
at the time the direction is given.
Subsection (4) requires a registered
organization that operates a health benefits fund to comply with a solvency
direction given to it by the Council under subsection (1).
Subsection (5)
provides that, subject to subsections (6) and (7), a solvency direction will
remain in force for the period specified in the direction (but not a period
exceeding 3 years from the date the direction is given). Council is allowed to
issue a further direction when the previous direction has
expired.
Subsection (6) requires the Council to revoke or vary a solvency
direction, in writing, should it no longer be needed.
Where a registered
organization requests that a direction be varied or revoked,
subsection (7), requires that the Council must determine, within 28 days
whether it wishes to revoke or vary it. If the Council does not vary or
revoke the direction within 28 days, subsection (8) ensures that the direction
continues in force.
Under subsection (9) the Council must give the
registered organization written notice of its decision under subsection (7) and,
if it refuses to revoke or vary a direction, the reasons for its
decision.
Subsection (10) ensures that a reference to a solvency
direction in this section includes a reference to solvency direction as
varied.
Division 3B – The capital adequacy standard for
registered organizations
Division 3B details the capital adequacy
standards for registered organizations and related matters.
Section 73BCF states that the purpose of Division 3B is to establish
capital adequacy standards and ensure that registered organizations that operate
health benefits funds comply with those standards in order to maintain
sufficient assets to conduct the business.
73BCG – Council to
establish capital adequacy standards
Subsection 73BCB(1) requires the
Council to establish written capital adequacy standards.
Subsection (2)
allows the Council to set different standards for particular funds, for
different types of funds, or apply standards in certain
circumstances.
Subsection (3) requires the Council to consult with the
Australian Government Actuary before establishing a capital adequacy
standard.
Subsection (4) declares that a capital adequacy standard
established by the Council for the purposes of this Division is a disallowable
instrument for the purposes of section 46A of the Acts Interpretation Act
1901.
73BCH – Purpose of capital adequacy
standard
The purpose of the capital adequacy standard, as defined in
section 73BCH, is to ensure that there are sufficient assets in the health
benefits fund of each registered organization to provide adequate capital to
conduct the health insurance in accordance with the NHA and in the
interests of contributors.
73BCI – Registered organizations to
comply with capital adequacy standard
Subsection 73BCI(1) stipulates
that, subject to subsection (2), each registered organization that operates a
health benefits fund must comply with the capital adequacy standards set by the
Council.
Subsection (2) allows the Council to declare, by notice in
writing, that the capital adequacy standard does not apply to a particular
registered organization, does not apply in particular circumstances or does not
apply for a particular period.
Subsection (3) states that, in making a
declaration under subsection (2), the Council may impose conditions upon any
registered organization affected by the declaration.
Subsection (4)
states that, if an organization fails to comply with any conditions referred to
in subsection (3), the declaration made under subsection (2) is taken to cease
to apply.
Subsection (5) states that, if the Council is satisfied that a
declaration made under subsection (2) or a condition imposed under
subsection (3), no longer applies to a registered organization the declaration
or the condition should be revoked or varied, as is appropriate.
Where a
registered organization requests that a declaration made under subsection (2),
or a condition referred to in subsection (3), be varied or revoked the Council
must determine, within 28 days, whether it wishes to revoke or vary the
declaration or the condition (subsection (6)). If the Council does not vary or
revoke the direction within 28 days, subsection (7) states that declaration or
condition remains valid.
Under subsection (8) the Council must give the
registered organization written notice of its decision to revoke or vary a
declaration or condition under subsection (6) and, where it refuses to vary or
revoke, the Council must provide the reasons for its decision.
Subsection
(9) ensures that a reference to a declaration or condition in this section
includes a declaration or condition as varied.
A decision by the Council
to refuse to revoke or vary a declaration, or refuse to revoke or vary a
condition applying in relation to a declaration, is reviewable by the
Administrative Appeals Tribunal.
73BCJ – Council may give
capital adequacy directions
Subsection 73BCJ(1) allows the Council to
give written directions (capital adequacy directions) to a registered
organization that operates a health benefits fund where it is satisfied there
are reasonable grounds to believe that the assets of the fund will not provide
adequate capital for the conduct of the health insurance business in accordance
with the NHA and in the interests of the contributors to the
fund.
Subsection (2) defines capital adequacy directions as those
directions the Council determines to be reasonably necessary to ensure, as far
as practicable, that the assets of the health benefits fund conducted by the
organization will provide adequate capital for the purposes described in
subsection (1).
Subsection (3) allows the Council to give capital
adequacy directions to a registered organization that operates a health benefits
fund even when it is satisfied that the health benefits fund meets the capital
adequacy standard at the time the direction is given.
Subsection (4)
requires a registered organization that operates a health benefits fund to
comply with a capital adequacy direction given to it by the Council under
subsection (1).
Subsection (5) provides that, subject to subsections (6)
and (7), a capital adequacy direction will remain in force for the period
specified in the direction (but not a period exceeding 3 years from the date the
direction is given). Council is allowed to issue a further direction when the
previous direction has expired.
Subsection (6) requires the Council to
revoke or vary a capital adequacy direction, in writing, should it no longer be
needed.
Where a registered organization requests that a direction be
varied or revoked, subsection (7), requires that the Council must
determine, within 28 days whether it wishes to revoke or vary it. If the
Council does not vary or revoke the direction within 28 days, subsection (8)
ensures that the direction continues in force.
Under subsection (9) the
Council must give the registered organization written notice of its decision
under subsection (7) and, if it refuses to revoke or vary a direction, the
reasons for its decision.
Subsection (10) ensures that a reference to a
capital adequacy direction in this section includes a reference to capital
adequacy direction as varied.
This item omits the words “or served under subsection
73BAC(2)”, from subsection 73BEB(1). Note that Item 2 repeals
section 73BAC.
This item repeals the previous paragraph 82G(1)(c) and substitutes a new
paragraph that incorporates some additional functions of Council with respect to
registered organizations including:
− establishing solvency
standards;
− establishing capital adequacy
standards;
− establishing uniform standards for reporting to
Council.
This item inserts a new paragraph which allows the Council to appoint
inspectors under section 82R to investigate the affairs of registered
organizations and exercise the other related powers and functions listed under
Part VIA.
This item repeals two paragraphs 82G(1)(f) and (g) and replaces them with
four new paragraphs (f), (g), (ga) and (gb) that expand the functions and powers
of Council.
Paragraph (f) specifies that an additional role of the
Council will be to appoint an administrator to a health benefits fund or a
registered organization.
Paragraph (g) specifies that another role of
Council will be to receive the reports of the administrator and to deal with the
reports of the administrator.
Paragraph (ga) extends the role of the
Council to approve the voluntary winding up of health funds or registered
organizations.
Paragraph (gb) extends Council’s role to being able
to apply to the Court for the winding up of a health benefits fund or a
registered organization.
This item repeals paragraph 82G(1)(q) rescinding the previous obligation
on the Council to make recommendations to the Minister in relation to
applications from registered organizations for exemption from the minimum
reserve conditions.
This item provides the insertion of a new paragraph into subsection
82G(1) that gives Council a function to cooperate with other regulatory agencies
on matters affecting registered organizations and the private health insurance
industry generally.
This item inserts a new Division before section 82Q of Part VIA of the
NHA. Part VIA of the NHA deals with the conduct and supervision of the affairs
of registered organizations.
Division 1 – Preliminary
Division 1 adds 3 new sections which outline the Part, the purpose
of the Part and outline the limitations on administration and winding up of
health benefit funds and registered organizations.
82QA –
Outline of Part
Section 82QA outlines the Part. Subsection (1) notes
that Division 1 sets out the purpose and defines concepts for the Part.
Subsection (2) notes that under Division 2 the Minister or Council may appoint
inspectors to investigate and report on health benefit fund affairs. Subsection
(3) notes that under Division 3 the circumstances and legal basis upon which a
fund can be placed under administration are described. Subsection (4) notes
that under Division 4 the circumstances and legal basis under which a fund or a
registered organization can be wound up are set out.
82QB –
Purpose of the Part
Section 82QB explains that the purpose of the
part is to ensure that supervision of the business, affairs and property of
funds and registered organizations in all activities provide for the best
interests of contributors to health benefits funds.
82QC –
Limitations on administration and winding up of health benefits funds and
registered organizations
Subsection (1) declares that, despite the
provisions of any other law of the Commonwealth or of any law of a State or
Territory, the fund conducted by a registered organization, or the registered
organization itself, can only be placed under administration, or dealt with as a
fund under administration, in accordance with Division 3.
Subsection (2)
declares that, despite the provisions of any other law of the Commonwealth or of
any law of a State or Territory, the fund conducted by a registered
organization, or the registered organization itself, can only be wound up in
accordance with Division 4.
This item repeals the definition of affairs which was previously
contained in the NHA. The definition was repealed because, as previously
defined, it had a narrow application which was limited to the fund conducted by
the registered organization. Now that Part VIA covers the winding up of
registered organizations also the expression affairs must have a broader
application. Thus, it is appropriate to leave the concept undefined, thus
allowing it to be interpreted according to its tenor in the broadest possible
way.
These items insert additional definitions, necessary for the Part, into
subsection 82Q(1). The definitions are of the following words and
phrases:
− appointing
authority;
− assets;
− conducting
organization;
− contributor;
− Court;
− friendly
society;
− fund;
− fund under
administration;
− liabilities;
− organization
under administration; and
− voluntary deed of
arrangement.
This item inserts a new heading.
Division 2 –
Investigations into affairs of registered organizations
These item omit various words to ensure that the Council or the Minister
(in Division 2 both are referred to as the appointing authority)
will be able to appoint an inspector under Division 2 to a registered
organization if they have reason to suspect that:
− the affairs of a
registered organization are being, or are about to be, carried on in a manner
that is not in the best interests of the contributors to the fund conducted by
the organization; or
− a registered organization has contravened, or
failed to comply with, a provision of this NHA or the regulations, a term
or condition of registration imposed on it by or under this NHA or a
direction under this NHA served on it; or
− having regard to an
auditor’s statement under subsection 82L(4), a registered organization has
not complied with the provisions of the Private Health Insurance Incentives
Act 1997 or the Private Health Insurance Incentives Act
1998.
The “show cause” procedure has been removed and
provision has been made for the direct appointment of an inspector, upon the
Minister or Council giving reasons to that organization for appointing that
inspector.
This item replaces subsection 82R(2) and requires a notice of appointment
of an inspector by the Minister to be signed by the Minister and a notice of
appointment of an inspector by the Council to be signed by the
Commissioner.
These items omit the word Minister replacing it with
authority or appointing authority, so as to ensure that the
Council or the Minister can appoint an inspector and deal with the report of the
inspector.
This item inserts a new subsection 82W(1A) that provides that an
inspector who makes a report must send a copy of that report to either the
Minister or the Council (that is, the inspector must send a copy of the report
to the Minister if the Council appointed that person and vice versa).
This item omits the word Minister replacing it with appointing
authority when identifying the person to whom an inspector must provide a
report in relation to this subsection.
This item repeals subsection 82W(4) that previously granted the Minister
power to refer a report of an inspector to the Registration Committee for
examination and report.
These items omit the word Minister replacing it with
authority or appointing authority, so as to ensure that the
Council or the Minister can appoint an inspector and deal with the report of the
inspector.
This item inserts a new subsection (9A) into section 82W (the section
that sets out the requirements for the handling of the inspector’s report)
that declares that an inspector is protected, so long as they are acting in good
faith, from civil and criminal proceedings in relation to:
− the
publication of a report to the appointing authority; or
− any opinion
expressed, in accordance with subsection 82W(3), that a person has committed a
criminal offence.
This amendment puts beyond doubt the inspector’s
freedom to report the facts as they see them, without fear of defamation
proceedings or any other legal action.
This amendment is a consequential amendment in relation to Item
36.
This item inserts a new section after section 82W.
82WA –
Minister and Council to inform each other about action
taken
Subsections (1) and (2) require both the Council and the
Minister to inform each other of any action to be taken on the basis of an
inspector’s report with regards to an organization.
This item is a renumbering provision.
This item is a transitional provision that ensures any delegation
previously made or given effect to under section 82X of the NHA continues
to have effect notwithstanding these amendments.
This item is a renumbering provision.
This item is a transitional provision that ensures any proceeding
commenced under section 82Y of the NHA continue to have effect
notwithstanding these amendments.
This item repeals sections 82Z to 82ZM of the NHA. Sections 82Z
to 82M contained the judicial management of funds and winding up of funds
provisions under the Act. Those provisions are replaced by a new scheme for the
administration and winding up of both funds and organizations that is more
substantial and detailed than its predecessor. The new scheme streamlines
processes while providing better safeguards for the interests of contributors
when funds or registered organizations are under administration or being
wound up.
Division 3 – Administration of funds and
registered organizations
Subdivision 1 –
Preliminary
82XA – Purpose of division
Section
82XA defines the purpose of the Division which is to permit the business,
affairs and property of a fund or organization under administration to be
administered so that it maximises the chance for contributors to continue to be
covered for health insurance and if this is not possible safeguards the
financial interests of the contributors in the event of winding
up.
82XB – The basis of the law relating to
administration
Section 82XB sets the basis of the law in regard to
administration. The general structure of the provision is to displace existing
law permitting the voluntary administration of a registered organization so as
to properly provide for the protection of the interests of contributors of the
fund conducted by the organization. Thus, subsection (1) prevents any law of a
State or Territory that, but for this section, would relate to the
administration of a registered organization from applying to that
organization.
Note also that Division 3 contains new provisions adopted
from Part 5.3A of Chapter 5 of the Corporations Law, with modifications
to reflect the purposes of this Division. Those provisions are either set out
specifically in Division 3 or are applied by reference as a law of the
Commonwealth, rather than State or internal Territory law. (A different
approach is taken to the winding up of funds and registered organizations.) As
a consequence, subsection (2) states that the administration of either a health
benefits fund or a registered organizations is to occur in accordance with this
Division and Divisions 6, 7, 8, 10, 11, 13 and 16 of Part 5.3A of Chapter 5 of
the Corporations Law and Division 7A of Part 5.6 of Chapter 5 of the
Corporations Law. The applied Divisions of the Corporations Law
may be modified by provision of this Division and by
regulations.
Subsection (3) confirms that the Corporations Law
that is to apply to any given fund or organization is to be the Corporations
Law of the relevant State or internal Territory as it is in force from time
to time. Thus, for example, if an administrator is appointed to a registered
organization operating in New South Wales the Corporations Law that would
be applied through subsection (2) is the Corporations Law of New South
Wales as it exists at that particular time.
Subsections (4) and (5)
translate key concepts contained in the Corporations Law for use in the
NHA. Subsection (6) confirms that regulations may provide for different
modifications of the Corporations Law depending on the nature of the fund
or organization under administration.
82XC –
Definitions
Section 82XC inserts a definition of administrator
for use in the Division.
Subdivision 2 – Appointment of an
administrator
82XD – Council may appoint
administrator
82XE – Qualifications for appointment as
administrator
The qualifications required of an administrator are
detailed in section 82XE.
The basic requirements are set out in
subsection (1); that is, the administrator must be registered as an official
liquidator under the Corporations Law and must not be related to the fund
or the registered organization.
Subsection (2) states that, in relation
to the fund, a person is regarded as being related to that fund if they
are:
− a contributor to the fund; or
− an auditor of the fund;
or
− a chargee of property of the fund; or
− an officer of a
body corporate that is a chargee of the property of the fund.
Subsection
(3) states that, in relation to a registered organization, a person is regarded
as related to that organization if they are:
− an officer of the
organization; or
− an auditor of the organization; or
− an
officer of a body corporate that is related to the organization; or
− a
chargee of property of the organization; or
− an officer of a body
corporate that is a chargee of the property of the
organizations.
Subsection (4) states that the question as to whether one
body corporate is related to another is to be determined in accordance with the
relevant provision of the Corporations Law.
Subsection (5) notes
that, under this section, the appointment of a person as an administrator of a
fund or a registered organization does not make the person an officer of the
organization.
82XF – Grounds of appointment of an
administrator
Section 82XF lists the grounds for appointment of an
administrator to a health fund or to a registered organization.
Under
subsection 82XF(1) an administrator can only be appointed to a health benefits
fund if, and only if, the Council believes that such an appointment is in the
interest of the contributors and:
− the Council is satisfied, on
reasonable grounds, that:
. there has been a breach of the solvency standard;
or
. there has been a breach of the capital adequacy standard; or
. the
conducting organization has contravened any applicable rule, condition or
direction; or
− a conducting organization has requested it;
or
− there has been a report provided by a liquidator (where the
liquidator commenced a voluntary winding up of a fund) stating that the assets
of the fund will not be sufficient to meet the liabilities of the fund within a
period of 12 months after commencement; or
− there are grounds set out
in regulations that apply to the fund.
Subsection (2) provides a
definition of the phrase applicable rule, condition or direction; used in
subsection (1).
Subsection (3) states that an administrator can only be
appointed to a registered organization if, and only if:
− grounds exist
under subsection (1) for the appointment of an administrator to the health
benefits fund conducted by the organization and, the Council is satisfied, on
reasonable grounds, that
. the health benefits fund is the primary business
of the organization; or
. property of a fund may have been invested in or
transferred to another business conducted by the organization; or
. because
of either the nature of, or the manner of conducting, either the business or
affairs of the fund or the organization generally, or because of the ownership
of the property of the fund and of other property of the organization, it is
either necessary or convenient for the administrator to administer all of the
business, affairs and property of the organization; or
− a request is
made to the Council from the governing body of a registered organization for an
administrator to be appointed; or
− there has been a report provided by
a liquidator (where the liquidator commenced a voluntary winding up of an
organization) stating that the assets of the organization will not be sufficient
to meet the liabilities of the organization within a period of 12 months after
commencement; or
− there are grounds set out in regulations that apply
to the organization.
Subsection (4) notes that, in forming any belief or
satisfaction for the purposes of this section, the Council may use any
information in its own records or any information contained in any report
(including an inspector’s report) or return made to it. A report may
include a report made orally or a report made in writing.
82XG –
Council may give directions to administrator
Section 82XG allows the
Council to give an administrator written directions concerning administration
(subsection (1)). Directions will usually be general but can also be specific
in relation to the circumstances of the particular organization (subsection
(2)). Directions may require the provision of interim reports to the Council
(subsection (3)).
82XH – Remuneration of
administrator
The Council may determine the remuneration and
allowances of the administrator under section 82XH and who is to pay the
remuneration. In most cases, the remuneration and allowances of the
administrator would be paid from the assets of the fund under administration or
the assets of the organization under administration.
82XI –
Administrator to displace management of fund or registered organization
Subsections 82XI(1) and (2) ensure that, for so long as the
administrator is appointed to a fund or to a registered
organization:
− the management of the fund or organization vests in the
administrator;
− any officer vested with the management of the fund or
organization is, by force of these subsections, divested of that
management;
− the administrator is taken to be the public officer;
and
− the person who was the public officer immediately prior to the
appointment of the administrator ceases to be the public officer.
82XJ
– Administrator of fund may recommend whole organization be placed under
administration
Section 82XJ allows an administrator appointed to a
fund to make a recommendation in writing to the Council (which is accompanied by
their reasons for the recommendation) that they be appointed to the whole
organization (subsections (1) and (2)).
The Council, in considering the
administrator’s recommendation and reasons, must have regard to the
grounds set out in subsection 82XF(3). If the person who was appointed as
administrator to the fund is appointed as administrator to the organization then
under subsection (4) the actions of the administrator made in relation to the
original appointment continue to have affect.
82XK –
Termination of appointment of administrator
The Council, under
section 82XK, is able to terminate an administrator’s appointment at any
time by written notice (subsection (1)).
If the Council terminates an
administrator’s appointment it may appoint a replacement administrator
under the same conditions and directions or may vary the terms and conditions of
appointment (subsections (2), (3) and (4)).
A decision to terminate the
appointment of an administrator under subsection (1) may be reviewed by the
Administrative Appeals Tribunal.
Subsection (5) provides that, if a
replacement administrator is not appointed, the terminated administrator is
divested of the power to control or carry on the business and manage the affairs
of the fund or the registered organization and those powers are returned to the
controlling officers of the organization.
Subsection (6) provides that
the Council must not fail to replace an administrator whose appointment has been
terminated unless the Council is satisfied that it is in the interest of
contributors not to appoint a replacement administrator.
82XL –Main duties of administrator
Section 82XL
states that the main duty of the administrator is to examine the business,
affairs and property of the fund or organization, form an opinion as to the most
appropriate action to be taken with respect to the fund or organization and to
make a final written report to the Council.
82XM – Day-to-day
duties of administrator
Section 82XM outlines the day-to-day duties
of an administrator appointed to a fund or to an organization. The fund or
organization must be managed the organization as efficiently and economically as
possible.
If the administrator has been appointed to a fund they are
to:
− ascertain the assets and liabilities of the fund;
and
− if the business of the fund has been mixed with other business of
the conducting organization, apportion the assets and liabilities between the
fund and that other business; and
− determine the rights and interests
of contributors.
If the administrator has been appointed to a registered
organization then the duties are wider. They are required
to:
− ascertain the assets and liabilities of the fund of the
registered organization and of the other businesses of the organization;
and
− if the business of the organization has been mixed with the
business of the fund apportion the assets and liabilities between the fund and
that other business; and
− determine the rights and interests of
contributors to the fund.
82XN – Powers of
administrator
Section 82XN defines the powers of an administrator
while a fund or an organization is under administration. Under subsection
82XN(1) the administrator has the power, in the interests of contributors,
to:
− control the business, affairs and property
− carry on
the business and to manage the affairs and property
− terminate or
dispose of all or part of the business
− perform any other function and
exercise any other powers that any of major decision-makers could perform or
exercise.
For a fund, these powers may include the execution of a
document, bringing or defending proceedings or anything else for the purpose of
the business (subsection (2)).
For a registered organization, the
administrator can remove from office an officer of the organization and appoint
a person as an officer and also execute a document and bring or defend
proceedings or do anything else for the purpose of the business (subsection
(3)).
82XO – Powers of other officers of registered
organizations suspended
Subsections 82XO(1) and (2) creates two
offences (maximum penalty of 6 months imprisonment for each). If while either a
fund or an organization is under administration, a person (other than the
administrator) performs or exercises, or purports to perform or exercise a
function or power of an officer of either the conducting organization or the
registered organization, without the administrator’s written approval, the
person is guilty of an offence. As noted in subsection (5), for the purposes of
this section, an officer is to include a receiver or receiver and manager
of any assets of the fund or organization, as the case requires.
82XP
– Administrator taken to act as agent of organization
Section
82XP declares that, whilst exercising a power as an administrator of a fund or
registered organization, the administrator is taken to be acting as the agent of
the organization.
82XQ – Additional powers of the
administrator
Section 82XQ relates to the application of Division 8
of Part 5.3A of Chapter 5 of the Corporations Law. In broad terms,
Division 8:
− will allow the administrator to deal with property of
either the fund or organization covered by a floating charge notwithstanding the
fact that the charge may have crystallised (section 442B);
− specifies
the circumstance in which an administrator may dispose of property that is
subject to a charge, which has been leased or which is being occupied by another
person (section 442C);
− prevents the administrator from taking control
of property in circumstances where, for example, a receiver took possession of
the property prior to the appointment of the administrator or the property
subject to the charge in question is perishable
(section 442D);
− grants the administrator a qualified privilege
(section 442E, but note 82XZK below);
− allows persons dealing with the
administrator to assume that the administrator has been validly appointed and
that he or she has the capacity to enter into contracts or dealings on behalf of
the fund or organization.
In respect of the specific clauses of section
82XQ, subsection (1) states that in applying Division 8 of Part 5.3A of Chapter
5 of the Corporations Law, the Division is taken not to include section
442A (the contents of which are broadly provided for in subsection 82XN(3)) and
subsection 442D(1) (which disables an administrator in favour of a person who
has a charge over the whole, or substantially the whole, of the property of the
fund or the property of the organization).
Subsection (2) states that,
not withstanding the fact that sections 128 and 129 of the Corporations
Law are not within the applied Divisions specified in section 82XB, they are
taken to be applied, subject to any modification by regulations, for the
purposes of this section.
Subdivision 4 – Information concerning
and books and property of, funds or organizations under
administration
82XR – Directors to help
administrator
Subsection 82XR(1) ensures that the directors of
the organization deliver all records in the directors possession that relate to
the health insurance business of the fund or organization as soon as possible.
The director is also obliged to inform the administrator of the location of
other records that relate to the business of the fund or
organization.
Directors also are obliged to give the administrator a
statement about the business, property, affairs and financial circumstances of
the fund or organization in accordance with the requirements of the
administrator within 7 days (or later if the administrator agrees) from the
commencement of administration (subsection (2)).
Subsection (3) ensures
that the director gives as much assistance as the administrator reasonably
needs.
Subsection (4) creates an offence (maximum penalty of 12 months
imprisonment) for a director who fails to comply with the requirements of
subsections (1), (2) or (3).
Subsection (5) defines director for
the different types of registered organizations.
82XS –
Administrator’s rights to certain records
Subsection 82XS(1)
declares that a person is not entitled to retain possession of the records of
the organization that relate to the fund or the organization, as the case
requires, against the administrator.
Subsection (2) allows secured
creditors to retain possession of such records but they must provide the
administrator access to those records.
Subsection (3) allows the
administrator to serve notice upon a person so that they will deliver up any
records of the organization. Subsection (4) requires the minimum period in such
a notice to be at least 3 days.
Subsection (5) creates an offence
(maximum penalty of 1 year imprisonment) for a person who fails to comply with
the written request of the administrator. If the person can prove that they
were entitled to retain possession of the books then this is a defence against
such a prosecution.
82XT – Only administrator can deal with
property of fund or organization under administration
Section 82XT
ensures that only an administrator deals with the property of the fund or
organization under administration. Subsection (2) voids any property
transaction or deal the conducting organization or the registered organization
enters into unless entered into by the administrator; the administrator
consented to the transaction; or the Court ordered the transaction or deal.
Subsection (4) allows the Court to prevent a transaction from being void under
subsection (2).
Subsection (3) exempts an authorised deposit-taking
institutions (banks, building societies etc.) from the application of
subsection (2) if the transaction or dealing is made in good faith and in the
ordinary course of banking business after the administration began, but not if
the administrator gives the bank written notice of their appointment or the
administrator places a notice about their appointment in a national newspaper or
newspaper circulating in each jurisdiction where the conducting organization or
registered organization carries on its business.
Under subsection (5), if
an officer of the conducting organization:
− enters into a transaction
or dealing; or
− was in any way related or involved in a transaction;
and
the transaction in question is void because of the operation of
subsection (2) the officer who entered into the dealing or transaction has
committed an offence (maximum penalty of 6 months imprisonment).
Subsection (6) defines the terms of Australian ADI and
officer used in the section.
82XU – Order for
compensation where officer involved in transaction
Subsections
82XU(1) and (2) provides a mechanism that allows a court to order that
compensation be paid by an officer where that officer has been found guilty of
the offence contained in subsection 82XT(5). Subsection (3) gives the court a
power to relieve a person of part or all of a liability (to pay compensation)
that would otherwise have been payable if the person acted honestly and having
regard to the circumstances of the case the person ought fairly to be
excused.
Subsections (4), (5) and (6) allow a person to apply to the
Federal Court of Australia for relief if he or she believes that proceedings
under subsection 82XT(5) may be commenced against them. The provisions allow a
person to pre-empt any order to pay compensation and to seek relief from an
order to pay compensation before any criminal proceedings have
commenced.
82XV – Effect of administration on the members of a
registered organization
Section 82XV ensures that, whilst an
organization is under administration, the administrator does not transfer shares
or alter the status of the members of the organization unless the Court approves
such action.
82XW – Protection of property during
administration
Section 82XW relates to the application of Division 6
of Part 5.3A of Chapter 5 of the Corporations Law. In broad terms,
Division 6 will:
− prevent, unless the administrator or a Court grants
permission, the enforcement of a charge against the property of a fund or the
property of a registered organization once the administration commences (section
440B);
− prevent, unless the administrator or a Court grants
permission, the owner or lessor of property that is used, occupied or in the
possession of the fund or registered organization from being repossessed by an
owner or lessor (section 440C);
− prevent, unless the administrator or
a Court grants permission, the continuation of any court proceeding against the
fund, the registered organization or the property of the fund or the registered
organization (section 440D);
− protect the administrator from any civil
damages because he or she has refused to consent to a request in respect of the
enforcement of a charge, the repossession of an occupied property etc. (section
440E);
− prevent, unless the administrator or a Court grants
permission, the continuation of enforcement proceedings against the fund, the
registered organization or the property of the fund or the registered
organization (section 440F);
− limit the power of officers of the Court
(such as a Registrar or Sheriff) in relation to take action against the fund,
the registered organization or the property of the fund or the registered
organization (section 440G);
− mean that any action taken against the
fund, the registered organization or the property of the fund or the registered
organization will be deemed to be a pending action (ie it must wait until the
outcome of the administration is known) (section 440H); and
− prevent a
guarantee (made personally by a director or a spouse of a director in relation
to a liability of the fund or the registered organization) from being enforced
unless the Court agrees (section 440J).
In respect of the specific
clauses of section 82XW, subsection (1) states that section 440A of the
Corporations Law will not apply. (Section 440A contains rules about how
a company under administration can be wound up; such rules are not appropriate
for the purposes of this Part.)
Subsection (2) states that where an
administrator or Court is considering (under section 440D of the Corporations
Law as applied) whether or not to allow a legal proceeding to continue,
whilst the fund or registered organization is under administration, the
administrator and the Court must consider whether:
− the action in
question relates to the property of the fund; and
− such proceedings
would be materially detrimental to the interests of contributors.
82XX
– Rights of chargee, owner or lessor of property of fund or organization
under administration
Section 82XX relates to the application of
Division 7 of Part 5.3A of Chapter 5 of the Corporations Law. In broad
terms, Division 7 will:
− allow a chargee or receiver to take
possession etc. of property where they started the process of taking possession
etc. prior to the commencement of the administration (section
441B);
− allows a chargee or receiver to take possession etc. of
perishable property even though the administration may have commenced (section
441C);
− allow the Court, upon application by the administrator, to
limit the actions of a chargee or receiver notwithstanding the fact that they
may have started the process of taking possession etc. prior to the commencement
of the administration (section 441D);
− not prevent a person giving a
notice to a conducting organization or registered organization stating that they
will (when they are allowed) commence action to recover the secured property
(section 441E);
− protect a chargee or receiver from prosecution under
subsection @82ZHBB(5) in relation to any transaction they may lawfully make in
respect of charged property referred to above (sections 441F and 441G);
and
− allow the Court, upon application by the administrator, to limit
the actions of an owner or lessor of property that is used, occupied or in the
possession of the fund or registered organization from being repossessed by an
owner or lessor (section 441H).
In respect of the specific clauses of
section 82XX, subsection (1) states that both section 441A and selected words in
441D(1) are not to be included in the applied Division. (Section 441A relates
to situations were there is a charge over all, or substantially all, of the
property of a company or there are two or more charges; such rules are not
appropriate for the purposes of this Part.)
Subsection (2) states that
nothing in the applied Division 7 of Part 5.3A of Chapter 5 of the
Corporations Law the enforcement of a charge so long as the administrator
or the Court are satisfied that:
− the charge does not relate to the
property of the fund; and
− enforcement of the charge would not be
materially detrimental to the interests of contributors.
Subdivision 5
– Procedure for considering whether to execute voluntary deeds of
arrangement
82XY – Definitions
Section 82XY
states that, for the purposes of the Subdivision, the definition of a
creditor includes a contributor to a health benefits fund or to a
registered organization that is under administration.
82XZ –
Administrator may convene meeting and inform creditors
Subsection
82XZ(1) allows an administrator to convene a meeting of the creditors of the
fund or organization under administration to consider the possibility of
executing a voluntary deed of arrangement. The administrator must give 5
business days written notice of the meeting to as many creditors as possible and
by publishing a notice of the meeting in a national newspaper or a local daily
newspaper in all places where the registered organization has an office
(subsection (2)).
The notice to the creditors must be accompanied by a
report which outlines the financial circumstances of the organization, the
details of the proposed deed of arrangement, and a statement from the
administrator as to why it would be in the creditors’ interests to enter
into a voluntary deed of arrangement (subsection (3)). The deed proposed may be
any arrangement for which the administrator might be able to obtain creditor
endorsement. In particular, the proposed deed of arrangement may include a
provision for the health insurance business to continue under the control of the
same registered organization or may include transfer of the health benefits fund
to another registered organization (subsection (5)).
Note, however, that
any administrator who proposes a voluntary deed of arrangement must be able to
satisfy the requirements of subsections 82XZC(3), (4), (5) and (6) (see
below).
82XZA – Conduct of the meeting
Section 82XZA
allows the administrator to chair the meeting of creditors and to adjourn the
meeting, but not for a period longer than 30 days. Other matters related to the
convening, conduct of, or procedure at a meeting or the voting, quorum and
notice requirements of a meeting will be provided for through the regulations
(see 82ZF below).
82XZB – What creditors may
decide
Section 82XZB allows the creditors at the meeting to resolve
whether or not to execute a deed of arrangement specified in a resolution. The
deed specified in the resolution may be different from the one originally
proposed by the administrator.
Subdivision 6 – Administrator to
report to Council
82XZC – Administrator to give a report to
Council
Section 82XZC instructs the administrator on the report to
Council. Subsection (1) requires the administrator to conclude the
investigation of the fund or organization and submit a final report to the
Council within 3 months. Council may give the administrator a longer period for
submitting the report if there are special circumstances (Subsection (2)).
If the creditors of the organization agree to the voluntary deed of
arrangement originally proposed by the administrator, or a different voluntary
deed of arrangement that is still protective of the interest of contributors,
the administrator must recommend to the Council that it approve the execution of
the deed (Subsection (3)).
Under subsections (4) and (5) the
administrator must not recommend to the Council the approval of a voluntary deed
of arrangement that limits the rights of a creditor unless the administrator is
of the opinion that the organization is insolvent or likely to become insolvent.
A deed will be taken to limit those rights if it:
− removes or limits
the right of a creditor to the payment of a debt or other liability;
or
− removes or limits a creditor’s entitlement to an asset;
or
− delays the right of a creditor to make or enforce a claim for the
payment of a debt or liability.
If the administrator:
− does not
propose a deed; or
− the administrator proposes a deed but the
creditors do not agree with it, have varied it in such a way that the
administrator is not satisfied that it would be protective of the interests of
contributors or the administrator has proposed a deed but the organization is
not insolvent or likely to be so;
then the administrator must recommend a
course of action that is in the best interests of the contributors to the fund
(Subsection (7)).
Subsection (8) outlines the course of action the
administrator might otherwise recommend to the Council. Those courses of action
are:
− a scheme of arrangement which may involve the execution of the
deed in the same terms as the voluntary deed that the creditors rejected;
or
− that the fund be wound up; or
− that the administration
cease and that the control of the health insurance business be resumed by the
organization.
Subsection (9) provides that the scheme of arrangement may
make provision for the fund to continue under certain conditions or may provide
for the transfer of the fund to another organization.
82XZD –
Dealing with the report given to the Council
Section 82XZD instructs
Council in dealing with the administrator’s report. In deciding whether
or not to approve a voluntary deed of arrangement Council may request the
administrator to provide any further information that it considers necessary and
engage any person to assist it in evaluating the information contained in the
report of the administrator (Subsection (1)).
Subsection (2) provides
that, if the Council is satisfied that a voluntary deed of arrangement is in the
circumstances, in the interests of contributors, it must by written notice
inform the administrator that it approves the execution of the deed and request
the administrator to prepare the deed for execution.
Subsection (3)
provides that, if the Council is not satisfied that a voluntary deed of
arrangement is in the circumstances, in the interests of contributors, it is
required to inform the administrator in writing and request that the
administrator to either:
− seek another meeting of the creditors to
consider a further voluntary deed of arrangement; or
− to examine the
other possible courses of action outlined in section 82XZC(8)
and report back
to Council.
Subsection (4) states that, if the Council is satisfied that
a course of action recommended by the administrator under subsection 82XZC(7)
will be in the best interests of the contributors to the fund, the Council must,
by written notice, direct the administrator to either:
− make an
application to the Court, in accordance with subsection 82XZE(1), to seek orders
to implement a scheme of arrangement; or
− make an application to the
Court, in accordance with subsection 82YP(1) or 82YU(1), to seek orders for the
winding up of either the fund or the organization.
Subsection (5) states
that, if the Council is not satisfied that a course of action recommended
by the administrator under subsection 82XZC(7) will be in the best interests of
the contributors to the fund, the Council must, by written notice, request the
administrator to either:
− seek another meeting of the creditors to
consider a further voluntary deed of arrangement; or
− to examine the
other possible courses of action outlined in section 82XZC(8)
and report back
to Council.
If the administrator has to provide a further report to
Council under subsections (3) or (5) then that report must be dealt with in
accordance with this section (Subsection (6)).
82XZE –
Administrator to seek order of Court in respect of certain courses of
action
Section 82XZE provides that an administrator may seek an order
of Court in respect of certain courses of action.
If the administrator
recommends a scheme of arrangement, and the Council agrees that this is in the
best interest of contributors, the administrator must seek approval from the
Court to give effect to recommendation (subsection (1)).
During the
application to the Court for approval of the scheme, the Council and any other
person interested is entitled to be heard and the Court may give orders in
relation to scheme if those orders are in the circumstances in the interests of
the contributors (subsection (2)).
Any Court order in these circumstances
is binding on all persons and overrides the constitution and any rules of the
organization (subsection (3)).
Subsection (4) provides, for
clarification, that a Court order is not required to give effect to a voluntary
deed of arrangement or when the business is resumed by the
organization.
Subdivision 7 – Execution, variation,
termination and avoidance of voluntary deeds of arrangement
82XZF
– Execution of voluntary deeds of arrangement
Section 82XZF
relates to the application of Division 10 of Part 5.3A of Chapter 5 of the
Corporations Law. In broad terms, Division 10 will:
− allow for
the inclusion of prescribed clauses in a voluntary deed of arrangement, allow
the administrator to also be the administrator of the deed, and require the
administrator to prepare the deed (section 444A);
− specify the way in
which the deed is to be executed (section 444B);
− compel a creditor
not to act inconsistently with the deed prior to its formal execution (section
444C);
− specify the impact of the deed upon the all of the creditors
of the fund or the registered organization (section 444D);
− prevents a
person bound by the deed from taking legal action against the fund, the
registered organization or the property of the fund or the registered
organization, unless a Court grants permission (section 444E);
− allow
the Court to limit the rights of a secured creditor, an owner or lessor where
the exercise of such rights by those people would have a material adverse effect
on achieving the purposes of the deed (section 444F);
− specify the
impact of the deed upon the organization, its officers and the deed’s
administrator (section 444G); and
− explains the extent to which the
deed will release the fund or registered organization from debts owed (section
444H).
In respect of the specific clauses of section 82XZF, subsection
(2) states that if the creditors resolve to replace the administrator (in their
role as administrator of the deed) with another person the resolution does not
have effect unless it has been approved by the Council.
Subsection (3)
states that the obligations upon the administrator to prepare the deed
(subsection 444A(3)) and the obligation upon the organization to execute the
deed (subsection 444B(2)) have effect only if the Council has approved the
execution of the deed.
82XZG – Variation, termination and
avoidance of voluntary deeds of arrangement
Section 82XZG relates to
the application of Division 11 of Part 5.3A of Chapter 5 of the Corporations
Law. In broad terms, Division 11 will:
− allow a variation of a
voluntary deed of arrangement (section 445A);
− give the Court a power
to cancel a variation of the deed (section 445B);
− specify the
circumstances when the deed terminates (section 445C);
− provide
grounds for the Court to terminate a deed where, for example, information
provided to creditors prior to their vote on the deed was false or misleading
(section 445D);
− allow a meeting of creditors to be called at
which a variation or termination of the deed might be considered (section
445F);
− allow, where doubt may exist, for the Court to conclusively
determine whether the deed has been entered into in a lawful way (and thus
should be validated) or determine that there was a flaw in the entering of the
deed (and thus should be avoided) (section 445G);
− declare that any
termination or avoidance of the deed will have no effect on the previous
operation of the deed.
In respect of the specific clauses of section
@82ZKB, subsection (1) confirms that section 445E will not be included as a part
of the applied law (because that section would allow the creditors to decide
that they wish to wind up the fund or the registered organization). Subsection
(1) also precludes paragraph 445C(b) from forming part of the applied law.
Subsection (2) confirms that at a meeting, called in accordance with
section 445F of the applied law, the creditors may consider either the variation
of termination of the voluntary deed of arrangement. If those creditors resolve
to vary the deed the variation does not come into effect unless both the
administrator and the Council believe that the variation is, in the
circumstance, in the interests of contributors (see subsections (3), (4), (5)
and (6)).
82XZH – Effect of termination of voluntary deeds of
arrangement
Subsection 82XZH(1) states the four ways in which a
voluntary deed of arrangement may be terminated, these are:
− by
resolution passed at a meeting of creditors convened under section 445F of
Corporations Law (as applied) and as provided for in subsection 82XZG(2);
or
− by order of the Court under section 445D of Corporations
Law (as applied); or
− by order of the Court under section 445G of
Corporations Law (as applied); or
− in circumstances specified
in the deed as circumstances in which the deed is to terminate.
Thus,
unless the Council makes a determination under subsection (2), upon termination
the administration of the fund or the registered organization revives. So for
example, if the creditors simply decided that they no longer wished to
participate in the deed they may terminate it but, at that point, the control of
the fund or organization does not return to the original managers. Rather, the
administration revives so that Council, based upon information and a
recommendation provided by the administrator, may make a considered decision
about possible future courses of action in respect of the fund or the
organization.
Notwithstanding subsection (1), the Council may determine
that the administration is not to revive (subsection (2)). Such a decision may
be made where, for example, the voluntary deed of arrangement has
self-terminated after almost all of the requirements of the deed have been met.
In such a case, the Council may determine that there is no benefit to the
contributors in reviving the administration and simply allow the control of the
fund or organization to be returned to its original management. Subsections
(3), (4) and (5) deal with machinery matters.
Subdivision 8 –
Additional powers of the court in relation to administration
82XZI
– Court may make orders to protect interests of
contributors
Section 82XZI relates to the application of Division 13
of Part 5.3A of Chapter 5 of the Corporations Law. In broad terms,
Division 13 will:
− provide the Court with a power to make such orders
about how this Division should operate in relation to a particular fund or
registered organization (section 447A);
− provide the Court with a
power to protect the interests of contributors during administration (section
447B);
− provide the Court with a power to declare whether the
appointment of an administrator under this Division is valid or not (section
447C);
− allow the administrator to seek directions from the Court in
respect of any aspect of administration provided for under this Division
(section 447D); and
− provide the Court with a power to supervise the
conduct of the administration if the Court believes that such supervision is
warranted (section 447E).
The specific modifications made in the section
relate to the translation of the section 447B of the Corporations Law (as
applied) for use with funds and registered organizations.
Subdivision
9 – Miscellaneous
82XZJ - When Administration begins and
ends
Section 82XZJ clarifies when administration begins and ends.
Administration begins when the administrator is appointed to a fund or
organization (subsections (1) and (2)).
Administration of a fund or
organization ends when:
− the Council terminates the appointment of an
administrator and does not replace them; or
− a voluntary deed of
arrangement is executed; or
− when the Council notifies the
administrator that it has accepted the administrator’s recommendation that
the administration cease; or
− when a liquidator is appointed;
or
− the Court makes an order for a course of action approved by the
Council.
82XZK – Indemnity
Section 82XZK indemnifies
the administrator for anything done in good faith while being an
administrator.
82XZL – Effect of things done during
administration of fund or registered organization
Section 82XZL
ensures that any payment transaction or other act or thing done with the consent
of the administrator, while the fund or organization is under administration, is
valid and effectual and cannot be set aside in the winding up of the
organization.
82XZM – Time for doing act does not run while act
prevented by this Division
Section 82XZM states that where, for any
purpose, this Division prevents an act from being done within a time period that
was required, or allowed, for the doing of that act then the time period is
extended or deferred according to how long this Division prevented the
particular act from being done. An example of the application of this section
is as follows. If a registered organization has entered into a contract that
contains a clause allowing it an option to extend the contract (and that clause
also requires that such an option be exercised before the day the contract would
otherwise terminate) the organization would not lose the legal right to extend
the contract due simply because no action had been taken during a period of
administration. This is because section 82XZM has the effect of extending that
time period by how long the registered organization was under
administration.
82XZN – Disclaimer of onerous
property
Liabilities in respect of the health benefits fund or
registered organization under administration may be reduced through a process of
disclaiming assets, where those assets can only be owned subject to meeting a
liability.
Examples of assets that might be subject to disclaimer include
unsaleable land on which there is a liability for mortgage payments and for
rates or a lease on a building which is near to its expiry date but which is
subject to liability for repair. In such cases it may be more effective to
abandon the asset and leave the party to whom a liability is owed to claim the
liability as against the fund or organization as a creditor.
To disclaim
such property means that a fund or organization’s rights, interests or
liabilities in that property is taken to have been terminated. However, the
termination of those rights, interests or liabilities in that property does not
affect any other person’s rights, interests and liabilities in that
property (except so far as necessary to relieve the fund or the organization
from the liability). Any person against who a liability falls after an
administrator of a fund or an organization disclaims property will be able to
claim that liability as a debt against the fund or organization in
question.
Section 82XZN relates to the application of Division 7A of Part
5.6 of Chapter 5 of the Corporations Law. In broad terms, Division
7A:
− will enable the administrator to disclaim certain property (in
some cases only with Court approval) and will allow a person with a property
interest to prevent disclaimer (section 268);
− requires the
administrator to provide notice of the fact that they have disclaimed property
(section 268A);
− allows a person who has a property interest in
property that is the subject of a disclaimer by the administrator to apply to
the Court to set aside that disclaimer (section 268B);
− determines
when disclaimer takes effect in relation to the property in question (for
example, 14 days after the notice of disclaimer) (section
268C);
− states the effect of disclaimer (section
268D);
− allows an application to be made to a Court to set aside a
disclaimer even after the disclaimer has been deemed to take effect (section
268E); and
− allows the Court to dispose of the disclaimed property
(section 268F).
Subsections 82XZN(1) and (2) modify the application of
Division 7A of the Corporations Law. Subsection (3) places the
administrator in the same position as liquidator operating under Division 7A of
Part 5.6 of Chapter 5 of the Corporations Law.
Subdivision 1 – Preliminary
82YA – Purpose
of Division
Section 82YA sets the purpose of the Division which is to
permit the business, affairs and property of a fund or organization to be wound
up in a way that is not materially detrimental to the interests of contributors
to the fund when it is being voluntarily wound up and in the case of a Court
approved winding up only when in the interests of contributors.
82YB
– The basis of the law relating to winding up
Section 82YB sets
out the basis of the law in relation to winding up either funds or registered
organizations. Subsection (1) states that the winding up of a fund is to be
carried out in accordance with Division 4.
Subsections (2), (3), (4) and
(5) declares that a registered organization that is a company, friendly society
or incorporated association is, subject to this Division, to be wound up in
accordance with the applicable law that would apply to that type of corporate
entity (that is, companies are to be wound up in accordance with the relevant
State or internal Territory Corporations Law, friendly societies are to
be wound up in accordance with the relevant State or internal Territory friendly
society law - usually the Friendly Societies Code - and incorporated
associations are to be wound up in accordance with the relevant State or
internal Territory incorporated associations legislation).
A registered
organization that is an unincorporated association may only be wound up by the
Court and dissolved in accordance with Part 5.7 of Chapter 5 of the
Corporations Law. Thus, an unincorporated association is not at liberty
to either dissolve itself or wind itself up whilst it remains a registered
organization. The law relating to unincorporated associations is relatively
uncertain and, if this Act is to protect the interests of the contributors of
such an organization, it is imperative that such a body is only allowed to wind
up upon an order of the Court (where any uncertainties may be properly dealt
with through Court orders and the like) (subsection (6)).
82YC –
Regulations may modify provisions of this Division for certain
purposes
Subsection 82YC(1) declares that regulations may be made to
which override the law or a State or internal Territory where it is necessary or
convenient to make such regulations for the purposes of this
Division.
Such regulations cannot modify a provision of Division 4 that
creates an offence or include a new provision that creates an offence
(subsection (2)). Further, the division has effect subject to any modifications
made through the regulations (where a modification may include an omission,
addition or substitution) (subsections (3) and (4)).
An
example of a circumstance when such regulations may be necessary is where a
State or internal Territory makes a relevant amendment to their Associations
Incorporation Act and that amendment does not promote the purposes of this
Division. In such a case, regulations may be made which override the operation
of the amendment in question.
82YD –
Definitions
Section 82YD includes a definition of director for
the Division (and any associated regulations) for the different types of
organizations that are health funds eg. companies, friendly societies,
incorporated associations and unincorporated entities.
Subsection 82YE(1) sets the circumstances in which winding up of a fund
can occur:
− by order of the Court on application of the
Council;
− by order of the Court on application of the
administrator;
− on the passing of a resolution by the directors of the
organization for the voluntary winding up of the fund and the approval of that
resolution by Council.
If the Council or an administrator applies to the
Court for the winding up of a fund, the Court may only agree to the winding up
if it is in the interest of the contributors (subsection (2)).
82YF
– When winding up of registered organizations can occur
Section
82YF specifies the manner in which a registered organization may be wound up.
The winding up of such a registered organization under any other law is
prohibited by subsection 82QC(2) of the Act. Subsection 82YF(1) specifies the 3
ways in which a registered organization may be wound up, being:
− by
order of the Court upon an application by the Council and in accordance with
section 82YT;
− by order of the Court upon an application by an
administrator and in accordance with section 82YU;
− on the passing of
a special resolution of the members of the registered organization, and the
approval of that resolution by the Council, in accordance with section 82YL
(recall that a registered organization that is an unincorporated association may
not voluntarily wind itself up).
When the Court is considering an
application made by the Council or an administrator for the winding up of a
registered organization it may only order such a winding up if it considers that
such an order is, in the circumstances, in the interests of contributors to the
fund concerned (subsection (2)). Further, to avoid any doubt, subsection (3)
declares that Division 3 of Part 5.5 of Chapter 5 of the Corporations
Law does not apply. (The Division in question sets out the usual
requirements for a creditors voluntary winding up of a company under the
Corporations Law.)
82YG – Resolution for the voluntary winding up of a fund cannot
be passed in certain circumstances
Section 82ZZZF states that a
registered organization cannot resolve that the fund conducted by it be wound up
voluntarily if an application for the fund or organization to be wound up has
already been made to the Court by the Council or an
administrator.
82YH – Resolution for the voluntary winding up of
a fund
Subject to 82YG, section 82YH states that a fund may be
voluntarily wound up if a majority of the directors of the organization resolve
that the fund should be voluntarily wound up, the Council approves of the
winding up and any additional approval in relation to the organization’s
rules and constitution has been obtained.
The Directors may resolve that
the fund be wound up only if the assets of the fund will be sufficient to meet
the liabilities of the fund within 12 months after the commencement of the
winding up and the contributors to the fund will not suffer any material
detriment, financial or otherwise as a result of the winding up (subsection
(2)).
If the Directors resolve to voluntarily wind up they must provide a
copy of the resolution to Council together with a statement of any additional
approval obtained in relation to the organization’s rules and
constitution; a declaration of reasons for having satisfied subsection (2);
and a statement of the financial position of the fund (subsection
3).
Under subsection (4), if additional approval is required under the
organization’s constitution and rules the directors must seek that
required approval. If such additional approval involves the members considering
the issue at a meeting the directors must provide those members with a copy of
the same information detailed in subsection (3).
Under subsection (5) an
instrument of appointment of a liquidator setting out the terms and conditions
of appointment etc. should be provided as soon as the resolution is made or
additional approval has been obtained. If the Council is satisfied that all the
correct processes have been adhered to it may approve, in writing by notice, the
winding up (Subsection (6)). With effect from the date of Council’s
approval or a date specified in the notice the appointment of the liquidator
takes effect and winding up commences (Subsection (7)).
Subsection (8)
clarifies the meaning of material detriment and subsection (9) defines
winding up.
82YI – Effect of appointing liquidator
of fund
Under section 82YH(7) the appointment of a liquidator takes
effect when the Council approves it. At that point the conducting organization
must cease to carry only any health insurance business related to the fund
except so far as is in the opinion of the liquidator, required for the
beneficial disposal or winding up of the fund (subsection 82YI(1)).
Any
transaction that is made without the sanction of the liquidator, after the
approval of the appointment is void (subsection (2)).
Subsection (3)
states that on the appointment of a liquidator all the powers of the directors
in relation to the health insurance business of the conducting organization
cease, except if the liquidator approves them.
If a vacancy occurs in the
office of the liquidator then the directors may fill the vacancy by the
appointment of a replacement liquidator, but only with the approval of the
Council (subsection (4)).
82YJ – Duty of liquidator where fund
turns out to be insolvent
Section 82YJ sets the duties of a
liquidator in a voluntary winding up situation. If the liquidator forms the
opinion that the assets of the fund will not be sufficient to meet the
liabilities of the fund within the period of 12 months after the commencement of
the winding up, the liquidator must provide a written report to Council stating
this opinion and the reasons for it. The liquidator must recommend the Council
either applies to the Court for the winding up of a fund or that the Council
appoints a person as administrator to the fund
(subsections (1)).
The report must include a statement of the assets
and liabilities of the fund (subsection (2)). On receipt of the report the
Council must having regard to the details in the report and the interest of the
contributors decide the most appropriate course of action (subsection
(3)).
82YK – Resolution for the voluntary winding up of organization
cannot be passed in certain circumstances
This section declares that
a registered organization cannot resolve to wind itself up voluntarily if an
application has been made to the Court by either an administrator or the Council
for its winding up. Section 82YK applies notwithstanding the existence of
section 490 of the Corporations Law which simply states that a company
being wound up in insolvency cannot, unless it has the permission of the Court,
file for a voluntary winding up.
82YL – Resolution for the
voluntary winding up of a registered organization
Subject to 82YK,
subsection 82YL(1) states that a registered organization may be voluntarily
wound up if:
− the majority of the directors of the organization
resolve that the question of whether it should be voluntarily wound up be put to
its members; and
− upon being put to the members, those members resolve
by special resolution that it should be voluntarily wound up; and
− the
Council approves of the winding up.
The Directors may can only put
the question to their members if the assets of the fund will be sufficient to
meet the liabilities of the fund within 12 months after the commencement of the
winding up and the contributors to the fund will not suffer any material
detriment, financial or otherwise as a result of the winding up (subsection
(2)).
Under subsection (3), if the directors resolve to voluntarily wind
up they must invite the members to a meeting to vote on a proposed resolution
for the voluntary winding up of the organization and, for the purposes of that
meeting, give each member a copy of the resolution accompanied by:
− a
declaration of reasons for having satisfied subsection (2)); and
− a
statement of the financial position of the fund; and
− a proposal for
the appointment of a liquidator on specified terms and conditions that would
take effect only when Council approves the resolution.
The directors must
ensure that, as soon as practicable after the invitation to members is made a
copy of the resolution and accompanying documentation is given to the Council
(subsection (4)).
The members may resolve by special resolution
that the organization be wound up and by ordinary resolution appoint a
liquidator (subsection (5)).
If the members approve the resolution and
the Council is satisfied that the assets of the fund will be sufficient to meet
the liabilities of the fund within 12 months after the commencement of the
winding up and the contributors to the fund will not suffer any material
detriment, financial or otherwise as a result of the winding up, Council may
approve the appointment of the liquidator. The date of effect of appointment is
the day of the Council’s notice in writing or such later date as is
specified in the notice and the winding up commences (subsections (6)
and (7)).
Subsection (8) clarifies the meaning of material
detriment and subsection (9) defines special resolution as it applies
to different types of registered organizations.
82YM – Effect of
appointing liquidator of registered organization
Under subsection
82YL(7), the appointment of a liquidator for a voluntary winding up of a
registered organization takes effect when the Council approves it. At that
point the organization must cease to carry on any business of the organization,
except so far as is in the opinion of the liquidator, the carrying on of such
business is required for the beneficial disposal or winding up of the
organization (subsection 82YM(1)). Any transaction that is made without the
sanction of the liquidator, after the approval of the resolution is void
(subsection (2)).
Subsection (3) states that, subject to subsection (4),
on the appointment of a liquidator all the powers of the directors in relation
to the business of the organization cease, except if the liquidator approves
them. If a vacancy occurs in the office of the liquidator then any of the
members may convene a general meeting for the purpose of appointing a
replacement liquidator and, at that meeting the members, with the approval of
Council, can fill the vacancy (subsection (4)).
82YN – Duty of
liquidator where registered organization turns out to be
insolvent
Section 82YN sets the duties of a liquidator in a voluntary
winding up situation. If the liquidator forms the opinion that the assets of
the organization will not be sufficient to meet the liabilities of the fund
within the period of 12 months after the commencement of the winding up, the
liquidator must provide a written report to Council stating this opinion and the
reasons for it. The liquidator must recommend the Council either applies to the
Court for the winding up of the organization or that the Council appoints a
person as administrator to the organization (subsection (1)).
The
report must include a statement of the assets and liabilities of the
organization (subsection (2)). On receipt of the report the Council must having
regard to the details in the report and the interest of the contributors decide
the most appropriate course of action (subsection (3)).
This section
excludes any duties imposed on the liquidator by section 496 of the
Corporations Law or that section as it is applied in relation to a
registered organization.
82YO – Application by Council to the Court for winding up a
fund
Section 82YO lists the grounds upon which the Council can make
an application to the Court for the winding up of a fund.
Under
subsection 82YO(1), the Council can make an application to the Court for the
winding up of a fund if, and only if, the Council believes that such an
application is in the interest of the contributors and:
− the Council
is satisfied, on reasonable grounds, that:
. there has been a breach of the
solvency standard; or
. there has been a breach of the capital adequacy
standard; or
. the conducting organization has contravened any applicable
rule, condition or direction; or
− a conducting organization has
requested it; or
− there has been a report provided by a liquidator
(where the liquidator commenced a voluntary winding up of a fund) stating that
the assets of the fund will not be sufficient to meet the liabilities of the
fund within a period of 12 months after commencement; or
− there are
grounds set out in regulations that apply to the fund.
Subsection (2)
provides a definition of the phrase applicable rule, condition or
direction; used in subsection (1).
Subsection (3) notes that, in
forming any belief or satisfaction for the purposes of this section, the Council
may use any information in its own records or any information contained in any
report (including an inspector’s report) or return made to it. A report
may include a report made orally or a report made in writing.
Where an
application is made to the Court by the Council to wind up a fund any person
likely to be affected by the winding up may be heard by the Court (subsection
(4)).
82YP - Application by administrator to the Court for winding up
of a fund under administration
Subsection 82YP(1) requires an
administrator to apply to the Court to wind up a fund when, after consideration
of the administrator’s report, the Council has agreed that the winding up
is in the best interests of the contributors.
At Court the Council and
any other person likely to be affected by the winding up may be heard
(subsection (2)).
82YQ – Orders made on applications for winding
up
The Court may make an order for the winding up of a fund only if
it considers the order to be in the interest of contributors to the
fund.
82YR – Scheme for winding up of fund to be prepared by
liquidator
If an order is made by the Court for a fund to be wound up
the liquidator appointed by the Court must prepare a scheme for the winding up
of the fund and then apply to the Court for orders to give effect to the scheme
(subsection (1)).
The conducting organization, the Council and any other
person likely to be affected by the winding up of the fund is entitled to be
heard by the Court (subsection (2)).
.
82YS – Binding nature of
Court orders
Under section 82YS, any orders made by the Court are
binding on all persons and take effect despite anything in the constitution or
rules of the conducting organization.
82YT – application by Council to the Court for winding up of a
registered organization
Subsection 82YT(1) declares that the Council
may apply to the Court for the winding up of a registered organization if, and
only if:
− grounds exist under paragraph 82YO(1)(a) or (c) for an
application to be made to the Court for the winding up of the fund conducted by
that organization and, the Council is satisfied, on reasonable grounds,
that
. the health benefits fund is the primary business of the organization;
or
. property of a fund may have been invested in or transferred to another
business conducted by the organization; or
. because of either the nature of,
or the manner of conducting, either the business or affairs of the fund or the
organization generally, or because of the ownership of the property of the fund
and of other property of the organization, it is either necessary or convenient
for the administrator to administer all of the business, affairs and property of
the organization; or
− a request is made to the Council from the
governing body of a registered organization for an administrator to be
appointed; or
− there has been a report provided by a liquidator (where
the liquidator commenced a voluntary winding up of an organization) stating that
the assets of the organization will not be sufficient to meet the liabilities of
the organization within a period of 12 months after commencement;
or
− there are grounds set out in regulations that apply to the
organization.
Subsection (2) notes that, in forming any belief or
satisfaction for the purposes of subsection (1), the Council may use any
information in its own records or any information contained in any report
(including an administrator’s report or an inspector’s report) or
return made to it. A report may include a report made orally or a report made
in writing.
Subsection (3) declares that, where an application is made to
the Court to wind up an organization, the organization and any person likely to
be affected by the winding up may be heard.
82YU – Application
by administrator to the Court for winding up of a registered organization under
administration
Subsection 82YU(1) requires an administrator to apply
to the Court to wind up an organization when, after consideration of the
administrator’s report, the Council has agreed that the winding up is in
the best interests of the contributors.
At Court the Council and any
other person likely to be affected by the winding up may be heard (subsection
(2)).
82YV - Orders made on applications for winding up
The
Court may make an order for the winding up of a registered organization only if
it considers the order to be in the interest of contributors to the fund
conducted by that organization.
82YW – Scheme for winding up of
a registered organization to be prepared by liquidator.
If an order
is made by the Court for an organization to be wound up the liquidator appointed
by the Court must prepare a scheme for the winding up of the organization and
then apply to the Court for orders to give effect to the scheme (subsection
(1)).
The organization, the Council and any other person likely to be
affected by the winding up of the organization is entitled to be heard by the
Court (subsection (2)).
82YX – Binding nature of
orders
Under section 82ZZQC any orders made by the Court are binding
on all persons and take effect despite anything in the constitution or rules of
the conducting organization.
Subdivision 7 – Procedural
provisions relating to winding up of funds or registered organizations
82YY – Notification provisions
Section 82YY
ensures that Council and the liquidator notify each other in writing of their
intention to make an application to the Court for a direction in relation to the
winding up of the fund or organization. The notice must specify the intention
and details of the proposed application (subsections (1), (3) and (4)). The
liquidator and Council are entitled to be heard by the Court if the other has
made application (subsections (2) and (5)).
82YZ – Council may
require liquidator to provide information
Under subsection 82YZ(1)
the Council may in writing require a liquidator to provide information on any
aspect of the winding up of a fund or organization. The information is to be
provided within the period specified by the notice, or a longer period, but only
if the Council allows (subsection (2)).
82YZA – Liquidator of
fund or registered organization to determine amounts owed to
contributors
Section 82YZA allows the liquidator of a fund or a
registered organization to determine the amounts owed to contributors
(subsection (1)).
Under subsections (2) and (3), when a liquidator is
winding up a fund or organization the liquidator must:
− determine the
identity of each person who is a contributor to the health benefits fund;
and
− determine whether the registered organization has a liability to
that person as a contributor to the fund; and
− if so, determine the
amount of the liability.
A determination made by the liquidator under
subsections (2) or (3) is to be made in accordance with regulations (if any)
that are made for the purposes of this section (subsection (4)).
The
liquidator must notify each person of the amount determined as the liability
and, for the purposes of winding up, the fund or organization is taken to have
that liability to that person (subsections (5) and (6)).
However, a
person who is notified of an amount by the liquidator may dispute that amount in
Court (subsection (7)).
82YZB – Application of the assets of
funds in winding up situations
Section 82YZB sets out the rules that
apply to the application of assets of a health benefits fund to the liabilities
of the fund. These rules apply irrespective of whether or not it is the fund or
the registered organization that is being wound up.
As a preliminary
point, section 556 of the Corporations Law is the base rule in relation
to the application of the assets of an entity upon winding up. Subsection
556(1) sets out a priority list of payments. Thus, in general terms, the costs
and expenses of the liquidator and administrator rank first (see paragraphs (a)
to (df) of subsection (1)). Then monies owed to employees or related to
employment are paid (see paragraphs (e) to (h) of subsection (1)). Ordinarily
all unsecured creditors would then rank equally to be paid from any remaining
assets.
Subsection 82YZB(1) applies to the winding up of a fund. The
subsection states that the assets of the fund are, firstly, to be distributed or
applied in accordance with section 556 of the Corporations Law (as a law
of the Commonwealth and with appropriate modifications made through regulations)
to the winding up of the fund.
Subsection (2) applies to the winding up
of a registered organization. The subsection states that the assets of the fund
conducted by the organization are, firstly, to be distributed in accordance with
subsection 556(1) of the Corporations Law (regardless of whether that
subsection applies to the registered organization directly or if it is applied
under the applicable law relating to that registered organization). Thus, for
example, where a South Australian incorporated association is being wound up,
the assets of the health benefits fund of that association are firstly to be
applied in accordance with subsection 556(1) of the Corporations Law as
that provision of the Law is applied to that incorporated association by the
South Australian Associations Incorporation Act 1985.
Subsection
(3) declares that, where any assets of a fund remain after the application of
subsections (1) or (2), those assets must then be applied according to the rules
set out in this subsection. Thus, if any assets remain, they are firstly to be
applied in discharging liabilities owed to the contributors of the fund
concerned. Then, if any assets still remain, they are then to be applied to the
other liabilities referrable to the fund. Lastly, if any more assets remain,
they are to be applied – for a voluntary winding up – in accordance
with subsection (4) or they are to be applied – for a Court ordered
winding up – in such manner as the Court directs.
Subsection (4)
requires any surplus assets to be dealt with in the manner specified in the
constitution or rules of the registered organization. Finally, if any surplus
assets are still available for distribution they must either be transferred to
the general assets of the registered organization (as opposed to being vested in
the fund) and used to pay any remaining liabilities owed by the organization or
they must be transferred to the general assets of the organization for use in
whatever way the organization thinks best (whichever case
applies).
Subsection (5) lists classes of persons the Court must have
regard to when considering where any surplus assets remaining (after the
satisfaction of all the liabilities referrable to the health benefits fund)
should go.
Subsection (6) confirms that, where a registered organization
is being wound up, any assets that are not referrable to the health benefits
fund of that organization should be applied to any non-fund liabilities in
accordance with the relevant State or Territory law. Thus, for example, if the
registered organization is a company, any assets of that company (that are not
related to the fund) should be applied to the payment of liabilities of the
company (that are not related to the fund) in accordance with the
Corporations Law.
82YZC - Liquidator to apportion liabilities
between health insurance business and other businesses
Under
subsection 82YZC(1) the liquidator is able to apportion liabilities between the
health insurance business and the other business(es) of a registered
organization. In making any apportionment the liquidator must comply with any
directions of the Court (subsection (2)).
82YZD – When winding up of registered organizations taken to
have begun
Section 82YZD states when the winding up of registered
organizations is taken to have begun, namely:
− in the case of a
voluntary winding up–on the day of the Council’s notice in writing
approving the special resolution or such later day as the Council specifies in
that notice; or
− in the case of a Court ordered winding up–on
the day when the order was made.
82YZE – Liability of officers
of registered organizations for loss to health benefits
fund
Subsection 82YZE(1) declares that officers of registered
organizations are liable to pay compensation to the organization
if:
− the registered organization contravenes the NHA in
relation to the health benefit fund; and
− the contravention results in
a loss to the fund; and
− the Court orders that the fund or
organization be wound up.
A person is not liable if the person proves
that they used due diligence to prevent the occurrence of the contravention
(subsection (2)).
The Court, on application by the liquidator, may order
the person liable to pay the organization (that is being wound up) the whole of,
or part of, the loss (subsection (3)).
82YZF – Actions etc. to
be stayed on application for winding up
Under section 82YZF if an
application has been made to the Court for the winding up of a fund, then writs,
summons and other processes against the organization conducting the fund are
stayed and cannot proceed without Court approval.
82ZA – Order of Court to be binding on all
persons
Section 82ZA makes an order of the Court, in relation to this
Part, binding on all persons.
82ZB – Compensation for
acquisition of property
Subsection 82ZB(1) declares that where, apart
from this section, the operation of a provision of Part VIA of the NHA
would result in the acquisition of property from a person otherwise than on just
terms, and such an acquisition would be contrary to the constitutional guarantee
contained in section 51(xxxi) of the Constitution, the Commonwealth is liable to
pay compensation of a reasonable amount to the person
concerned.
Subsection (2) states that where the person, referred to in
subsection (1), and the Commonwealth cannot agree on an amount of compensation
to be paid, the person may commence proceedings in the Federal Court of
Australia for the payment of such compensation. Subsection (3) confirms that
certain phrases used in the section have the same meaning as those same phrases
as they are used in the Constitution.
82ZC – Continued
application of other provisions of Act
Under subsection 82ZC(1), the
appointment of a person as an administrator of a fund or registered organization
does not affect the operation of other provisions of the NHA. However,
this does not apply to the provisions of Division 3 (which relate to the fund or
organization under administration and the rights and obligations of persons when
a fund or organization is under administration).
Under subsection
82ZC(2), the appointment of a person as liquidator of a fund or registered
organization does not affect the operation of other provisions of the
NHA. However, this does not apply to the provisions of Division 4 (which
relate to the fund or organization that is being wound up, and the rights and
obligations of persons when a fund or organization is being wound
up).
82ZD – Regulations may set out modifications of this Act in
relation to funds or organizations under administration or being wound
up
For the period of time during which a health benefits fund or
registered organization is either under administration or being wound up there
may be circumstances where some of the conditions of registration (contained in
Division 3 of Part VI or Schedule 1 of this Act) applicable to that fund or
organization may inhibit the process of administration or winding up and
act to the detriment of contributors. Section 82ZD is to be inserted in the
NHA to provide a mechanism to address such
circumstances.
Subsection 82ZD(1) provides a power to make regulations
modifying Division 3 of Part VI and Schedule 1 of the NHA whilst a fund
or organization is under administration or is being
wound up.
Subsections (2) and (3) state that the modifications made
through regulations may provide for different modifications according to the
nature of the fund or organization but any modification cannot modify a
provision of the NHA that creates an offence or create an offence from
regulations.
Subsection (4) confirms that the NHA has effect
subject to any modifications made under this provision and subsection (5) notes
that modifications may include omissions, additions and
substitutions.
82ZE – Jurisdiction of Courts
Section
82ZE enables the Federal Court of Australia to have jurisdiction to hear and
determine applications and make any orders under Part 1.
82ZF –
Regulations dealing with various matters
Throughout Divisions 3 and 4
there are numerous circumstances where a meeting may be held or where a document
or instrument must be provided to either the administrator or the Council.
Section 82ZF allows regulations to be made in respect of these meetings and
documents.
Section 105AB of the NHA sets out those decisions made under the
NHA that are reviewable by the Administrative Appeals
Tribunal.
Subsection (3A) allows decisions made by the Council in
relation to a declaration (made under section 73BCD) to exempt a registered
organization from the solvency standard to be reviewed by the
Tribunal.
Subsection (3B) allows decisions made by the Council in
relation to a solvency direction (made under section 73BCE) issued to a
registered organization to be reviewed by the Tribunal.
Subsection (3C)
allows decisions made by the Council in relation to a declaration (made under
section 73BCI) to exempt a registered organization from the capital adequacy
standard to be reviewed by the Tribunal.
Subsection (3D) allows decisions
made by the Council in relation to a capital adequacy direction (made under
section 73BCJ) issued to a registered organization to be reviewed by the
Tribunal.
The insertion of subsection 105AB(6) allows an application to be made to
the Administrative Appeals Tribunal for a review of a decision of Council, made
under subsection 79(7), to cancel the registration of a registered
organization.
The insertion of subsection 105AB(6AA) allows an
application to be made to the Tribunal for a review of a decision of Council,
made under section 82XK, to terminate the appointment of an
administrator.
The insertion of subsection 105AB(6AB) allows an
application to be made to the Tribunal for a review of a decision of Council,
made under subsection 82XZH(2), to prevent the revival of the administration of
a fund or organization where a voluntary deed of arrangement has been
terminated.
This item relates to transitional arrangements in respect of the
appointment of administrators under Division 3.
Subsection (1) declares
that, subject to subsections (2) and (3), an administrator who may have been
appointed in accordance with a relevant State or Territory law to a registered
organization (prior to the commencement of Part 1 of Schedule 2) is not
prevented from continuing their control of that registered organization simply
because of the prohibitions on such action that are contained in sections 82QC
and 82XB of the NHA.
Subsection (2) declares that, where the
Council appoints an administrator to a registered organization referred to in
subsection (1), any administration of that organization being carried out in
accordance with a relevant State or Territory law is to cease at the time of the
Council’s appointment of an administrator.
Subsection (3) declares
that where, the Council appoints an administrator to a health benefits fund of a
registered organization referred to in subsection (1), any administration of
that organization being carried out in accordance with a relevant State or
Territory law may continue, but only in so far as that administration relates to
the non-fund property of the organization.
This item relates to transitional arrangements in respect of the
appointment of judicial managers and the winding up under Division
4.
Subsection (1) declares that where, prior to the commencement of Part
1 of Schedule 2, an application has been made to a Court (under section 82Z of
the NHA) for the judicial management of a health benefits fund, that
application lapses if Part 1 of Schedule 2 commences prior to the actual
appointment of a judicial manager.
Subsection (2) states that where a
person has been appointed by a Court under section 82ZM of the NHA as a
judicial manager of a fund, sections 82Z to 82ZM are to apply in relation to
that judicial management (and to any subsequent Court orders), as if those
sections had not been repealed.
Subsection (3) states that where an
application has been made under section 82Z of the NHA, prior to the
commencement of this Schedule, for the winding up of the fund conducted by a
registered organization, sections 82Z to 82M continue to apply as though those
sections had not been repealed.
Schedule 2 – The prudential regulation of registered organizations
National Health Act 1953
Introduction
As noted in the discussion of the
commencement clauses, the sole purpose of Part 2 of Schedule 2 is to remove from
Part 1 of Schedule 2 any references to friendly societies after the transfer
date in the Financial Sector Reform (Amendments and Transitional
Provisions) Bill (No. 1) 1999 has been Proclaimed.
The primary
purpose of the Financial Sector Reform (Amendments and Transitional
Provisions) Bill (No. 1) 1999 is to transfer regulatory responsibility for
State and Territory based financial institutions, including friendly societies,
to a Commonwealth regulatory regime. Upon transfer, friendly societies
previously registered or incorporated under State or Territory law will become
companies under the Corporations Law and will be dealt with as such by
the National Health Act 1953 (as amended).
A further consequence
of the Financial Sector Reform (Amendments and Transitional Provisions) Bill
(No. 1) 1999 will be the amendment of a large number of Commonwealth Acts
(including the National Health Act 1953) to remove any reference to
friendly societies (as entities registered or incorporated under State and
Territory law). However, as the Financial Sector Reform (Amendments and
Transitional Provisions) Bill (No. 1) 1999 and this Bill are expected to be
in Parliament at the same time, it is desirable that a mechanism be put in place
in this Bill to prevent it from operating contrary to the intent of the
Financial Sector Reform Bill.
These items remove references to friendly societies from the relevant
provisions.
This item repeals paragraph (a) of the definition of director in
subsection 82XR(5) and substitutes a new paragraph that refers only to the
directors of companies incorporated under Corporations Law rather than
also mentioning directors of friendly societies.
This item removes the reference to friendly societies from the relevant
provision.
This item repeals paragraph (a) of the definition of director in
subsection 82YD(1) and substitutes a new paragraph that refers only to the
directors of companies incorporated under Corporations Law rather than
also mentioning directors of friendly societies.
These items remove references to friendly societies from the relevant
provisions.
Item 60
This item allows regulations to be made
to deal with any transitional, saving or application issues that might arise
relating to the amendments and repeals made in Part 2 of Schedule
2.
Schedule 3 – Private health insurance incentives
These amendments make it clear who is entitled to receive an incentive
payment and that a receipt will be issued by the health fund concerned. Under
the new arrangements the HIC will have 14 days to pay a claim for the incentive
payment and a decision to refuse payment will be reviewable by the HIC before it
is reviewable by the Administrative Appeals Tribunal.
This item repeals subsection 4-5(1) and replaces it with a new
subsection. The new subsection 4-5(1) provides that a person is entitled to
receive the incentive payment if they have paid a premium under an appropriate
private health insurance policy and the policy was issued by a health fund. A
health fund is defined in section 20-5 as “a registered organization
within the meaning if Part VI of the National Health Act
1953”.
This item inserts new section 4-6.
4-6 – Receipt for
payment of premium
The new section 4-6 requires a health fund to
issue a receipt to a person who pays a premium. The receipt must contain
information and be in such form as determined in writing by the Managing
Director of the HIC (subsection 4-6(1)).
Subsection (1) does not apply if
the premium to which the payment relates has been reduced under the premium
reduction scheme (subsection 4-6(2)).
This item repeals subsection 6-20(1) and inserts a new subsection. The
new subsection
6-20(1) provides that the HIC has 14 days in which it must
grant or refuse a claim made by a person for the incentive payment.
This item inserts new sections 6-25, 6-30 and 6-35.
6-25
– Application for reconsideration of decision refusing
claim
The new section 6-25 provides for a person who has been refused
a claim for the incentive payment to apply to the HIC to have the decision
reconsidered (subsection (1)).
The application for reconsideration must
be in writing and made within 28 days of notification of the decision to refuse,
unless the HIC has extended the period for making an application (subsections
(2) and (3)).
6-30 – Reconsideration by HIC
The new
section 6-30 provides that the HIC has to reconsider the decision and either
affirm or revoke the decision.
6-35 – Deadline for
reconsideration
The new section 6-35 provides that the HIC must
reconsider its decision within 28 days after receiving the application for
reconsideration (subsection (1)).
If the HIC does not advise the
applicant of its decision on reconsideration before the end of the 28 day
period, it is taken to have made a decision confirming the original decision
(subsection (2)).
This item amends subsection 8-5(1) by removing the word
“written”.
This item repeals section 8-10 of the PHIIA. Section 8-10 has
been incorporated into new section 18-2 at item 50.
Introduction
– Items 7 to 28
These amendments allow a person to register for
premiums reduction once only, rather than each financial year. If a person,
already registered for the premiums reduction scheme, obtains a further policy
from the same fund that issued the first policy, there is no need to register
again. Under the amendments a person who pays for a policy but is not covered by
the policy is also entitled to register for the premium reduction scheme.
Notification requirements have also been amended to make it clear when and to
whom notification of registration and revocation of registration in the premiums
reduction scheme is be given.
This item amends section 10-5 by removing the words “for a
financial year”.
Item 8
This item amends paragraph
10-5(b) by removing the words “, for that year”.
This item amends paragraph 10-5(c) by removing the words “for that
year”.
This item amends subsection 11-5(1) by removing the words “for a
financial year”.
This items amends subsection 11-5(1) by removing the words “for
that year”.
This item repeals subsection 11-5(3) and inserts two new
subsections.
The new subsection 11-5(3) enables a person to register once
only for the premiums reduction scheme.
The new subsection 11-5(3A)
provides that if a person who is registered with a fund in respect of an
appropriate private health insurance policy becomes eligible to be registered in
relation to another appropriate private health insurance policy issued by the
same fund, they are deemed to be registered. If a person becomes eligible for
registration in relation to an appropriate private health insurance policy that
is issued by a different fund, they must submit another application to register
for premiums reduction.
This item amends subsection 11-5(4) by removing the words “for a
financial year”.
Item 14
This item repeals section
11-10 and inserts a new section.
11-10 – Eligibility to apply
for registration
The new section 11-10 sets out who is eligible to
apply for registration under the premiums reduction scheme,
including:
− a person or employer who has paid a premium;
− a
person who is covered by the policy; or
− a parent, if everyone the
policy covers is a dependent child.
This item repeals redundant subsection 11-15(4).
This item repeals subsection 11-20(1) and inserts a new subsection with
two paragraphs. The new paragraph 11-20(1)(a) provides that a health fund must
notify the HIC when it receives an application for registration. New paragraph
11-20(1)(b) requires a health fund to notify the HIC of a person who is already
registered for the premiums reduction scheme and subsequently becomes eligible
to be registered in respect of another appropriate private health insurance
policy.
This item repeals subsection 11-25(1) and inserts a new subsection. The
new subsection
11-25(1) requires the HIC to notify a person that it is
refusing to register them for premiums reduction and also the health fund that
issued the policy to the person. The HIC must do so within 28 days of the
refusal occurring.
This item amends subsection 11-25(2) by removing the words “for a
financial year”.
This item amends paragraph 11-30(1)(a) by removing the words “for a
financial year”.
This item amends paragraph 11-30(1)(b) by removing the words “ for
the year” and substituting the words “for a financial
year”.
This item amends subsection 11-30(1) by removing the word
“written”.
This item repeals subsection 11-30(4) and inserts a new subsection. The
new subsection
11-30(4) requires a person who no longer wishes to be
registered in the premiums reduction scheme to notify their health
fund.
Item 23
This item amends subsection 11-40(1) by
removing the words “for a financial year”.
This item amends subsection 11-40(1) be removing the words “for
that year”.
This item amends section 11-40 by inserting a new subsection. The new
subsection 11-40(3) requires the HIC to notify the person if it revokes their
registration in the premiums reduction scheme and to also notify the fund that
issued the policy. The HIC must issue the notification within 28 days of the
revocation occurring.
Item 26
This item amends subsection
12-5(1) by removing the word “scheme” and substituting the words
“for that year”.
This item amends subsection 12-5(3) by inserting a new subsection. The
new subsection
12-5(3A) provides a formula for the amount of reduction a
participant in the premiums reduction scheme will receive if their policy is
less than 1 year.
This item repeals section 12-10 and substitutes a new
section.
12-10 – Participant in premium reduction
scheme
The new section 12-10 provides that a person is a participant
in the premiums reduction scheme in respect of an appropriate private health
insurance policy if:
− where the financial year is the financial year
that began on 1 July 1998 – the individual was registered under the
Private Health Insurance Incentives Act 1997 immediately before 1 January
1999 in respect of the policy; or
− where the financial year is the
financial year that began on 1 July 1998 or a later financial year – the
individual was registered under the premiums reduction scheme in respect of the
policy and the registration has not been refused.
Introduction –
Items 29 to 38
These amendments require a health fund to only
register once to become a participating fund in the premiums reduction scheme.
A fund will have its status revoked if it does not issue a recept to a person
for the purposes of the incentive payment, does not comply with the regulations
or on or after 1 July 2000, the fund does not offer no gap or known gap
policies.
Item 29
This item amends subsection 14-5(1) by
removing the words “for that financial year”.
This item amends subsection 14-5(2) by removing the words “for the
financial year beginning on 1 July 1998 or later financial year” and
substituting the words “for the purposes of this Act”.
This item repeals subsection 14-5(3) and inserts a new subsection. Under
the new subsection 14-5(3) a health fund, if approved by the Minister, will
become a participating fund.
Item 32
This item amends
paragraph 14-10(1)(d) by removing the words “until the end of the
financial year concerned”.
Item 33
This item inserts
is a new subsection 14-10(1A) providing that any undertaking given by a health
fund prior to the date on which Schedule 3 to the Health Legislation
Amendment Act (No. 3) 1999 receives Royal Assent is taken to comply
with paragraph 14(1)(d) of the PHIIA.
This item repeals redundant subsection 14-10(2).
Item 35
This item amends subsection 14-15(1) by removing the words
“subsections (2) and (3)” and substituting the words
“subsection (2)”.
This item repeals subsections 14-15(2) and (3) and inserts a new
subsection. The new subsection 14-15(2) provides that the Minister must not
approve an application by a health fund to participate in the premiums reduction
scheme on or after 1 July 2000 unless the health fund offers its members no gap
and known gap policies.
This item amends subsection 14-20 by removing the words “in
writing”.
This item inserts new Division 14A.
Division 14A –
Revocation of status of health fund as a participating fund
14A-1
– Revocation of status of participating fund
Subsection
14A-1(1) provides for the Minister to give notice to a health fund revoking its
status as a participating fund if any one of the following occurs:
− if
the fund fails to issue a receipt to a person who has paid a
premium;
− if the fund fails to comply with a condition of
participating in the premium reductions scheme as contained in the regulations;
or
− if the fund does not offer its members the choice of no gap and
known gap policies on or after 1 July 2000.
Subsection 14A-1(2) declares
that, upon the giving of the notice, the fund ceases to be a participating
fund.
Introduction – Items 39 to 46
The HIC is
processing claims by health funds using summary data. Consequently, these
amendments are required to facilitate summary data claiming and payment by the
HIC and to ensure there is a suitable mechanism for the HIC to pay part of a
claim by a health fund and to reconsider that decision.
This item amends subsection 15-5(1) by removing the words “a
financial year for”.
This item amends subsection 15-5(2) by removing the words “The HIC
must pay a health fund” and substituting the words “If a health fund
makes a claim that the HIC decides is correct, the HIC must pay to the
fund”.
This item repeals subsection 15-10(1) and inserts two new
subsections.
The new subsection 15-10(1) enables the HIC to refuse to pay
a claim, or part of a claim, by a health fund if it considers that the claim is
not correct.
Under the subsection 15-10(1A) the HIC must notify the
health fund of its decision.
Item 42
This item amends
subsection 15-20(2) by removing the number “(1)” and substituting it
with the number “(1A)”.
This item repeals subsection 15-25(1) and inserts a new
subsection.
The new subsection 15-20(3) provides that the HIC will be
taken to have made a decision that a claim from a health fund is correct if it
does not give the health fund notice on or before the day on which the claim
would be payable.
This item amends subsection 15-25(1) by removing the number
“(1)” and substituting it with the number
“(1A)”.
This item repeals redundant paragraph 15-25(2)(a).
This item repeals subsections 15-25(3), (4) and (5) and inserts two new
subsection, being subsections 15-25(3) and (4).
The new subsection
15-25(3) states that the HIC, as soon as practicable after receiving a request
from a health fund, must reconsider its decision not to pay a claim or only pay
a part of the claim.
The new subsection 15-25(4) states that if the HIC
varies its original decision or revokes it and makes a fresh decision, the
varied or fresh decision has effect from the time that the original decision was
made.
This item amends subsection 16-5(3) by removing the words “in
writing”.
This item amends section 16-5 by inserting a new subsection. The new
subsection 16-5(7) provides that, if the HIC gives a health fund notice, it is
required to give the HIC a certificate from a registered company auditor as to
the correctness of the fund’s accounts and records as they relate to the
participation of persons in the premiums reduction scheme, the reductions of
premiums and the receipt of money from the HIC.
This item amends subsection 16-10(1) by removing the words
“written”.
Introduction – Items 50 to
55
These amendments ensure that amounts are recoverable as debts to
the Commonwealth and provides for the HIC to set off a Commonwealth debt owed by
a person or a health fund with an amount due to be paid to the person or health
fund.
This item amends paragraph 18-5(1)(b) by inserting a new paragraph. The
new paragraph 18-5(1)(ba) provides that the incentive payment is recoverable
from a person who withdraws their claim.
This item repeals paragraph 18-5(1)(c) and substitutes it with two new
paragraphs.
The new paragraph 18-5(1)(c) provides that an amount is a
debt due to the Commonwealth if it was a payment to a health fund in relation to
a reduced premium and the person to whom the appropriate private health
insurance policy relates was a participant in the premiums reduction scheme and
not eligible to participate in the scheme.
The new paragraph 18-5(1)(ca)
provides that, a payment made to a health fund that relates to a premium for
which a reduction was not allowable, is a debt due to the Commonwealth.
This item repeals subparagraph 18-5(1)(d)(ii) and inserts a new
paragraph.
The new subparagraph 18-5(1)(d)(ii) provides that an amount is
a debt due to the Commonwealth, owed by a health fund, where the health fund has
not retained a persons application for registration with the premiums reduction
scheme.
This item amends subparagraph 18-5(1)(d)(iii) by removing the words
“to a financial year and”.
This item amends paragraph 18-5(2)(a) by removing the words “or
(b)” and substituting the words “, (b) or (ba)”.
This item amends paragraph 18-5(2)(b) by removing the words “(c),
(d) or (e)” and substituting the words “(c), (ca), (d) or
(e).
The item inserts a new section.
18-20 – HIC may set off
debts against amounts payable
The new subsection 18-20(1) provides
that where an amount would be payable to a person or a health fund and there is
an amount that is recoverable under section 18-5, the HIC may set off the HIC
may set off the whole or part of the amount that is owing against the amount of
the debt.
Under new subsection 18-10(2), if the HIC makes a set off, it
must be pay the person or the health fund the amount remaining after the set-off
and the amount that is owing to the Commonwealth is reduced by the amount that
has been set off.
This item amends Division 19 by inserting 3 new sections.
The new subsection 19-1(1) provides that the HIC may require a health
fund to provide certain information in relation to the premiums reduction scheme
and the incentive payments scheme relating to person who:
− is covered
at any time during a financial year specified in the notice by an appropriate
private health insurance policy issued by the fund; or
− paid premiums
under such a policy.
Subsection 19-1(2) states that the information that
the HIC can require a fund to produce includes:
− the name, residential
address and date of birth of each person covered by a policy or the person who
paid premiums under the policy;
− the fund membership number of the
policy;
− the name, residential address and date of birth of the person
covered by the policy whom the health fund treats as the contributor in respect
of the policy;
− whether the policy provides hospital cover, ancillary
cover or combined cover;
− the date on which the policy was
issued;
− whether the policy has terminated or been suspended, and, if
it has, the date on which it was terminated or was suspended;
− the
amount of the premium under the policy
− the period to which the
premiums relates;
− any increase or decrease in the
premium;
− whether a payment in respect of a premium that was due
within a period specified by the HIC was not paid; and
− any other
information relevant to Chapters 2 or 3 that has been determined in writing by
the Managing Director.
The new subsection 19-1 (3) provides that the
Managing Director must not make a determination that requires a health fund to
provide a person’s tax file number or information relating to the
physical, psychological or emotional health of any person.
The new
subsection 19-1(4) provides that determinations referred to in paragraph
19-1(2)(l) are disallowable instruments for the purposes of section 46A of the
Acts Interpretation Act 1901.
The new subsection 19-1(5) states
that the information that a health fund is required to provide must be in a form
approved by the HIC and provided within the period specified in the
notice.
The new subsection 19-1(6) provides that a health fund is guilty
of an offence if it fails to provide the information within the time as
specified on the notice issued by the HIC. The maximum penalty for the offence
is 20 penalty units. The obligation to provide information is a continuing
obligation and a health fund is guilty of an offence for each day, after the
period specified in the notice, until the information is
provided.
19-2 – Form of notices
The new subsection
19-2(1) provides that a notice under the PHIIA by the Minister or the HIC
to a health fund, or a notice, request or application by a health fund to the
Minister or the HIC may be in writing or in electronic form.
The new
subsection 19-2-(2) provides that a notice under the PHIIA by the HIC to
a person, other than a health fund, or a notice, request or application by a
person other than a health fund to the HIC must be in writing.
19-3
– Use of information to determine whether persons covered by private
health insurance policies are eligible for medicare benefits
The new
section 19-3 provides that, to determine whether a person covered by appropriate
private health insurance policy is an eligible person under either section 3, 6
or 7 of the Health Insurance Act 1973, the HIC can use information it has
obtained in determining whether the person was eligible to receive Medicare
benefits.
This item inserts a new section 19-6.
19-6 – Principles
relating to personal information
The new subsection 19-6(1) provides
that the Minister may make principles in relation to the acquiring of personal
information under the PHIIA and the storage, security, correction and use
and disclosure of such personal information.
The new subsection 19-6(2)
provides that a health fund must comply with such principles.
The new
subsection 19-6(3) provides that the principles are disallowable instruments for
the purposes of section 46A of the Acts Interpretation Act
1901.
The new subsection 19-6(4) provides that personal
information has the same meaning as in the Privacy Act 1998.
This item repeals paragraph 19-10(a) and inserts a new paragraph. The
new paragraph
19-10(a) provides that the decision of the HIC confirming a
decision to refuse to pay a claim for the incentive payment is reviewable by the
Administrative Appeals Tribunal.
This item amends paragraph 19-10(b) by removing the words “for a
financial year”.
This item repeals paragraph 19-10(e) and inserts two additional
paragraphs.
The new paragraph 19-10(e)(da) provides that a decision to
revoke a health funds status as a participating fund is reviewable by the
Administrative Appeals Tribunal.
The new paragraph 19-10(e) provides that
a decision by the HIC that a claim submitted by a health fund is incorrect is
reviewable by the Administrative Appeals Tribunal.
This item amends subsection 19-15 by inserting five additional paragraphs
after paragraph
19-15(b). Section 19-15 requires the HIC to give the
Commissioner of Taxation certain information within 90 days after the end of the
financial year. The additional information is:
− the fund membership
number of the policy;
− the identification code of the fund that issued
the policy;
− the type of membership provided by the fund in respect of
the policy;
− whether the policy has been terminated or
suspended;
− if the policy has been terminated or is suspended, the
date of the termination or suspension.
This item amends section 19-15 by adding two additional paragraphs of
information to be given by the HIC to the Commissioner of Taxation and two new
subsections.
The additional paragraphs of information to be provided
are:
− the total amounts paid by the HIC under Chapters 2 and 3 for the
financial year;
− any other information that the Commissioner
determines in writing.
The new subsection 19-15(2) provides that the
Commissioner must not make a determination that the HIC provide a person’s
tax file number or information relating to the physical, psychological or
emotional health of any person.
The new subsection 19-15(3) provides that
determinations by the Commissioner are disallowable instruments for the purposes
of section 46A of the Acts Interpretation Act 1901.
This item amends section 19-15 by inserting a new
section.
19-16 – Delegation
The new subsection
19-16(1) provides that the Minister may delegate, in writing, all or any of his
or her powers under the Act to:
− the Secretary of the Department of
Health and Aged Care;
− the Managing Director;
− an officer or
an employee of the Department of Health and Aged Care; or
− a staff
member of the HIC.
The new subsection 19-16(2) provides that the HIC may
delegate, in writing, all or any of its powers under the PHIIA to the
Managing Director or to a staff member.
The new subsection 19-16(3)
provides that the Managing Director may, in writing, delegate, all or any of
his or her powers under the PHIIA to a staff member of the
HIC.
Introduction – Items 65 to 66
These amendments
include changes and additions to the definitions contained in the Private
Health Insurance Incentives Act 1998.
This item amends paragraph (b) of the definition of appropriate
private health insurance policy by inserting “or 7” after
“6”. This is a reference to section 7 of the Health Insurance
Act 1973.
This item repeals the definition of participating fund and
substitutes a new definition. Participating fund means a health fund referred
to in subsection 14-5(1) or (3), other than a fund whose status as a
participating fund has been revoked under subsection 14A-1(1).
Schedule 3 – Private health insurance incentives
Introduction
This Part allows for consequential
amendments to the Health Insurance Commission Act 1973, which are
required to implement the 30% rebate scheme contained in the Act.
Item
67
This item repeals section 8DA and substitutes a new
section.
8DA – Administration of the private health insurance
incentives legislation
New section 8DA provides that the functions of
the Health Insurance Commission include the administration of the Private
Health Insurance Incentives Act 1997 and the Private Health Insurance
Incentives Act 1998.
Schedule 3 – Private health insurance incentives
Introduction
This Part allows for consequential
amendments to the National Health Act 1953, which are required to
implement the 30% rebate schemes contained in the PHIIA.
Item
68
This item repeals section 73ABB and substitutes a new
section.
73ABB – Registered health benefits organization to
comply with requirements of health insurance incentives
legislation
The new section 73ABB provides that it is a condition of
registration of a registered organization that it must not contravene a
requirement imposed on it by or under the Private Health Insurance
Incentives Act 1997 or the Private Health Insurance Incentives Act
1998.
This item amends paragraph 82G(1)(bb) by inserting the words “or
the incentives payment scheme, or the premiums reduction scheme within the
meaning of the Private Health Insurance Incentives Act 1998” after
“1997”.
This item amends paragraph 82L(3)(a) by repealing the paragraph and
substituting a new paragraph. The new paragraph 82L(3)(a) requires the report
of a participating fund, to the Private Health Insurance Administration Council,
to include:
− if the year was the year that commenced on 1 July 1997
– persons in respect of whom private health insurance policies issued by
the registered organization were in force during that year and who were
participants in the incentives scheme for that year; and
− if the year
was the year that commenced on 1 July 1998 or a later year – persons in
respect of whom appropriate private health insurance policies issued by the
registered organization were in force during that year.
This item amends paragraph 82L(3)(c) by inserting the words “or
the Private Health Insurance Incentives Act 1998” after
“1997”.
This item amends subsection 82L(4) by inserting the words “or
the Private Health Insurance Incentives Act 1998” after
“1997”.
This item repeals subsection 82L(5) and substitutes a new section. New
section 82L(5) provides for:
− participating fund means a participating fund within the
meaning of the Private Health Insurance Incentives Act 1997 or the
Private Health Insurance Incentives Act 1998;
− private
health insurance policy means a private health insurance policy within the
meaning of the Private Health Insurance Incentives Act 1997 or the
Private Health Insurance Incentives Act 1998.
This item amends subsection 82PA(2A) by inserting the words “or the
incentive payments scheme, or the premiums reduction scheme within the meaning
of the Private Health Insurance Incentives Act 1998”.
This item amends subsection 82PA(2B) by inserting the words “or
the Private Health Insurance Incentives Act 1998” after
“1997”.
This item amends paragraph 82R(1)(c) by inserting the words “or the
Private Health Insurance Incentives Act 1998” at the end of the
paragraph.
This item amends section 82ZSA by inserting a new paragraph at the end of
the section. New paragraph 82ZSA(c) provides that a complaint to the Private
Health Insurance Complaints Commissioners may be about any matter arising out of
or connected with the incentive payments scheme or the premiums reduction scheme
within the meaning of the Private Health Insurance Incentives Act 1998.